UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


LAW  LIBRARY 


i 


6 


<v 


THE 


LAW  RELATING  TO 


MERCANTILE  AGENCIES, 


BEING  THE  JOHNSON  PRIZE  ESSAY  OF  THE  UNION 
COLLEGE  OF  LAW  FOR  THE  YEAR  1886. 


BY 


JOSEPH  ^Y.    ERRANT, 

OF  THE  CHICAGO  BAE. 


PHILADELPHIA: 
T.    &    J.    AV.    JOHNSON    &    CO 

1889. 


CoPTRIGnX    BY 

T.  &  J.  W.  JOHNSON  &  CO 

18S9. 


COLLINS  PniXTIXG   HOUSE, 
705  Jayue  Street. 


i  PREFACE. 

CI 

X 

Mercantile  or  commercial  agencies  are  establishments 
which  make  a  business  of  collecting  information  relating 
to  the  credit,  character,  responsibility,  and  reputation  of 
merchants,  for  the  purpose  of  furnishing  the  information 
to  subscribers.  These  agencies  have  become  recognized 
and  permanent  adjuncts  to  the  world  of  trade  and  com- 
merce.    The  community  cannot  do  without  them. 

The  responsibilities  of  these  agencies  are  very  great. 
Upon  them  the  merchant  relies  for  information.  Char- 
acter and  credit  depend  upon  the  care  with  which  they 
perform  their  duties.  In  many  ways  they  are  influences 
for  weal  or  woe. 

E-ecognizing  the  importance  of  their  position  in  the 
commercial  world,  the  author  has  thought  that  it  would 
be  a  valuable  contribution  to  the  field  of  law  literature  to 
present  in  an  accessible  form  the  law  relating  to  them. 
The  aim  of  the  author  has  been  to  prepare  a  treatise  which 
should  be  of  practical  value  alike  to  the  lawyer  and  the 
student,  to  the  merchant  and  the  mercantile  agency. 
He  has  constantly  endeavored  to  bear  in  mind  the  needs 
of  these  parties  and  the  points  in  which  they  are  specially 
interested. 

The  principles  supporting  the  decisions  of  the  courts 
have  been  developed.     Special  attention  has  been  given 

3 


PREFACE.  IV 

to  the  statement  of  the  facts  in  each  particular  case,  in 
order  to  satisfy  the  practitioner  who  is  always  desirous 
of  knowing  upon  what  facts  a  decision  is  based.  The 
principal  points  in  the  opinions  of  the  courts  have  been 
presented,  and  it  has  seemed  desirable  to  present  them 
in  the  language  of  the  judges.  In  short,  the  aim 
throughout  has  been  to  produce  something  which  would 
be  really  useful  to  all  parties  in  interest. 

Much  time  and  labor  have  been  spent  in  collecting 
the  materials  for  this  work,  and  it  is  believed  that  all 
the  cases  on  the  subject,  scattered  as  they  are  through 
many  volumes  of  reports,  are  embodied  in  this  treatise. 

The  task  of  preparing  this  little  work  has  been  to  the 
author  an  interesting  and  instructive  one.  It  has  shown 
to  him  anew  the  elasticity  of  the  principles  of  the  com- 
mon law  and  their  po'.ver  of  adapting  themselves  to  the 
varyhig  demands  of  civilized  life. 


MERCANTILE   AGENCIES. 


niSTOKY  OF  THE  AGENCIES. 

That  there  was  a  need  for  institutions  of  the  nature 
of  those  under  discussion  is  shown  by  reports  of  several 
cases  in  the  English  Reports  prior  to  the  estabhshment 
of  Mercantile  Agencies.  In  the  years  1826  and  1827 
we  read  of  two  cases  reported  in  Carrington  &  Payne's 
lleports  in  which  the  defendant  was  a  Mr.  Foss,  the 
secretary  of  "  The  Society  for  the  Protection  of  Trade 
against  Swindlers  and  Sharpers."  It  was  the  duty  of 
the  secretary  to  send  to  members  printed  reports  for  the 
purpose  of  denoting  and  signifying  to  the  members  of 
the  society  the  names  of  such  persons  as  were  deemed 
and  considered  swindlers  and  sharpers,  and  improper 
persons  to  be  balloted  for  as  members  of  the  society. 

From  the  report  of  a  case  which  came  before  the 
House  of  Lords  in  1848  we  gain  some  information  in 
regard  to  the  "  Scottish  Mercantile  Society."  The  society 
had  been  formed  of  merchants  and  bankers,  and  its 
object  was  declared  to  be  "  To  concentrate  and  bring 
together  from  time  to  time  a  body  of  information  for  the 
exclusive  use  of  the  members  relating  to  the  mercantile 
credit  of  the  trading  community,  with  the  view  of  dimin- 
ishing the  hazards  to  which  mercantile  men  were  ex- 
posed." 

The  American  system  of  mercantile  agencies  owes  its 
origin  to  the  work  done  by  one  Church,  who  was  at  first 


2  MERCANTILE    AGENCIES. 

a  commercial  traveller.  On  his  business  tours  he  was  in 
the  habit  of  making  notes  as  to  different  persons.  He 
had  his  notes  for  his  own  use.  Other  people  knew  of 
his  notes,  and  would  come  and  ask  him  for  information. 
At  last  he  was  employed  by  about  thirty  New  York 
houses  to  travel  in  the  South  and  West  to  collect  infor- 
mation for  them.  His  labors  suggested  to  Lewis  Tappan 
the  idea  of  establishing  an  institution  which  should  make 
a  business  of  collecting  information  concerning  the  re- 
sponsibility, character,  reputation,  and  credit  of  mer- 
chants, and  which  should  furnish  this  information  to 
interested  persons  who  became  its  patrons.  In  an  able 
article,  written  in  defence  of  the  system,  published  in 
Hunt's  "  Merchants'  Magazine"  for  January,  1851,  Free- 
man Hunt,  speaking  of  Tappan's  Agency,  says :  "  Im- 
mediately after  the  terrible  mercantile  revolution  in 
1837,  when  our  whole  system  of  internal  commerce  was 
prostrated  and  nearly  all  its  operations  bankrupt,  this 
agency  was  planned  and  put  into  operation,  as  a  remedy 
for  some  of  the  difficulties  which  had  just  been  so  heavily 
experienced.  Its  design  was  to  uphold,  extend,  and 
render  safe  and  profitable  to  all  concerned  the  great  credit 
system  on  which  our  country  had  thriven,  doing  business 
to  an  immense  amount  with  all  the  world,  and  using  the 
capital  of  the  world  to  do  it  with." 

Before  proceeding  with  our  sketch  of  the  growth  of 
the  American  system  of  mercantile  agencies,  let  us  briefly 
consider  the  methods  employed  by  business  houses  for 
ascertaining  the  standing  of  merchants  prior  to  the  estab- 
lishment of  these  institutions.  We  are  told  that  "  they 
would  get  information  as  they  could  by  correspondence 
or  otherwise.  Some  of  the  larger  houses  employed  trav- 
elling agents  to  look  after  and  report  debtors,  and  collect 
debts.  Smaller  houses  were  deficient  in  the  information 
6 


MERCANTILE    AGENCIES.  3 

SO  necessary  to  their  success ;  the  larger  houses  got  it  at 
too  high  a  cost."  A  writer  in  the  "Cyclopaedia  of  Com- 
merce," edited  by  J.  Smith  Ilomans  and  J.  Smith  llo- 
mans,  Jr.,  and  published  in  1860,  says:  "A  comparison 
of  the  system  of  '  The  Mercantile  Agency'  with  that  of 
the  '  Commercial  Traveller,'  which  it  superseded,  is 
much  to  the  advantage  of  the  former,  as  regards  the 
item  of  cost,  as  well  as  information.  From  a  large  dry- 
goods  house  we  learn  that  in  old  times  its  expenses  for 
travellers  counted  by  thousands,  and  that  it  was,  to  a 
vexatious  extent,  in  the  power  of  clerks,  who  were  anx- 
ious to  make  sales,  and  whose  good  opinion  was  too 
often  won  by  civilities  rather  than  by  responsibility.  Now 
it  holds  an  efficient  check  upon  its  salesmen,  who  travel 
not  to  choose  customers,  but  to  make  collections,  and 
obtain  orders." 

It  was  to  displace  this  system  that  Lewis  Tappan,  in 
1841,  established  in  the  city  of  New  York  "  The  Mer- 
cantile Agency."  Owing  to  the  strong  anti-slavery  ten- 
dencies of  Tappan,  his  house  could  not  send  men  to  the 
South,  and  was  therefore  compelled  to  limit  its  opera- 
tions to  the  country  north  of  Mason  and  Dixon's  line. 
In  1842,  six  months  after  the  establishment  of  "  The 
Mercantile  Agency,"  Messrs.  Woodward  &  Dusenberry 
established  "  The  Commercial  Agency."  They  reported 
the  entire  country.  In  the  year  1846  Benjamin  Doug- 
lass became  Tappan's  coadjutor,  and  assumed  the  chief 
management.  From  this  time  the  business  grew  rapidly, 
and  assumed  a  permanent  and  recognized  position  among 
the  mercantile  institutions  of  the  country.  Subsequently 
Tappan  retired  from  business,  and  the  firm  became  Ben- 
jamin Douglass  &  Co.  This  firm  was  succeeded  by  R. 
G.  Dun  &  Co.  The  Woodward  &  Dusenberry  Agcuicy 
subsequently  became  "  The  McKillop  &  Sprague  Co.,'' 

7 


MERCANTILE   AGENCIES. 


and  "  Tlic  Tappan,  McKillop  &  Co.  Agency,"  being  the 
two  names  by  which  the  house  was  known  in  the  East 
and  West.  This  Tappan  was  some  relative  of  Lewis 
Tapj)an.  In  1878  tliis  agency  fiiiled,  and  retired  from 
business. 

A  few  years  after  the  establishment  of  "  The  Mercan- 
tile Agency"  and  "  The  (Commercial  Agency,"  J.  M. 
Bradstreet  established  "The  Improved  Mercantile 
Agency,"  which  was  some  years  afterwards  incorpo- 
rated, and  is  known  as  "  The  Bradstreet  Company." 

The  mercantile  and  commercial  agencies  were  origi- 
nally estabhshed  for  the  purpose  of  reporting  the  credit 
of  buyers  throughout  the  country.  It  was  Mr.  Brad- 
street who  first  published  a  book  giving  the  ratings.  The 
other  agencies  followx^d  his  example. 

Among  the  recent  features  of  the  business  may  be 
mentioned  the  "  Special  Agencies"  established  during 
the  past  ten  or  twelve  years,  wliich  confine  themselves 
to  reporting  a  particular  line  of  business.  Prominent 
among  these  are  the  agencies  devoted  to  the  furniture, 
stationery,  jewelry,  and  hardware  industries. 

In  England  mercantile  agencies  are  also  known  under 
the  name  of  "  Trade  Protection  Societies,"  and  appear 
to  liave  been  established  and  developed  independently  of 
the  American  agencies. 

Tlie  American  establishments  have  branch  offices  in 
all  the  prominent  cities  of  the  United  States  and  Canada, 
and  have  extended  their  operations  to  Great  Britain, 
France,  and  Germany. 

Without  going  into  details  as  to  the  methods  employed 
by  these  agencies,  it  may  be  said  that  the  country  is  di- 
vided into  districts  ;  each  district  reports  its  own  territory, 
and  there  is  a  daily  interchange  of  information  between 


MERCANTILE    AGENCIES.  5 

the  districts.  Correspondents  are  selected  with  the  ut- 
most care ;  in  fact,  everything  is  pkmned  with  the  idea 
of  securing  the  best  resuUs- 

Thus  tliese  agencies,  which  were  at  first  regarded  as 
"  partaking  of  the  nature  of  a  system  of  espionage  seem- 
ingly at  variance  with  that  candor  and  love  of  open  deal- 
ing so  characteristic  of  our  commercial  usages,"  have 
gained  the  confidence  of  the  mercantile  world,  and  have 
demonstrated,  by  their  careful  and  successful  manage- 
ment, that  they  are  necessary  parts  of  the  machinery  of 
trade  and  commerce. 


THE  QUESTION  OF  AGENCY. 

It  is  said  that,  in  the  early  days  of  mercantile  agencies, 
Charles  O'Connor  laid  down  for  them  tlie  principles  of 
the  law  under  which  they  should  act,  and  within  which 
they  would  find  protection.  We  do  not  know  what 
those  principles  were,  but  we  do  know  that  experience 
in  the  courts  has  taught  the  community  and  the  agencies 
what  principles  can  be  applied. 

The  mercantile  agency  is  the  agent  of  him  who  en- 
gages it  to  serve  him.  The  contract  signed  by  a  sub- 
scriber to  "  The  Bradstreet  Company"  agency  reads  as 
follows :  "  The  undersigned  hereby  employs  the  Brad- 
street  Company  to  investigate  and  report,"  etc. 

When  the  mercantile  agencies  first  came  into  the 
courts,  the  judges  recognized  the  fact  that  these  estab- 
lishments were  new  forces  in  the  community,  and  they 
felt  themselves  called  upon  to  assign  to  them  their  proper 
sphere.  In  Ormsby  vs.  Douglas,^  Woodruff",  J.,  in  giv- 
ing the  opinion  of  the  Court,  discusses  the  question  of 

1  37  N.  Y.  484. 


G  MERCANTILE   AGENCIES. 

agency  as  follows  ;  "  Laying  out  of  view  for  the  moment 
the  circumstance  that  the  defendant  in  this  case  made 
it  his  business  to  seek  information  in  order  to  furnish  it 
to  tliose  whose  occasions  and  interest  require  knowledge 
of  the  standing  and  cliaracter  of  others  wlio  dealt  or  pro- 
posed to  deal  with  them,  it  is  clear  that  if  the  witness 
Benton,  having  procured  a  note  to  be  discounted  on  the 
faith,  in  part,  of  the  plaintiff's  responsibility,  or  being 
about  to  do  so,  called  on  the  defendant  for  information 
respecting  his  standing  and  responsibility,  it  was  entirely 
lawful  for  the  defendant  to  give  him  all  the  information 
which  he  had  on  the  subject.  It  was  in  a  just  sense  a 
duty  which  one  member  of  the  community  owes  to  an- 
other for  mutual  protection  and  benefit,  and  the  law  will 
recognize  it  as  such  by  holding  it  privileged. 

"•  Information  of  the  description  referred  to  being  im- 
portant, there  is  no  legal  objection  to  the  employment  of 
an  agent  to  seek  and  communicate  it.  And  the  agent 
may  properly  be  paid  for  his  time,  labor,  and  expense  in 
the  pursuit  of  such  information. 

"  If  one  merchant  may  employ  his  own  private  agent 
to  seek  and  communicate  such  information,^  there  is  no 
legal  objection  to  the  combination  or  union  of  two  or 
more  in  the  employment  of  the  same  agent.  And  as  a 
consequence,  if  an  agent  may  act  for  several,  he  may 
make  the  pursuit  of  such  information  his  occupation,  and 
receive  from  those  who  desire  to  avail  themselves  of  his 
services  and  his  knowledge  acquired  in  such  occupation 
a  compensation  therefor." 

It  was  upon  su(;h  reasoning  that  the  courts  recognized 
the  mercantile  agencies  as  new  and  necessary  servants  of 
the  commercial  world. 

^  3  Deiiio,  110. 
10 


MERCANTILE    AGENCIES.  7 

THE  QUESTION  OF  PRIVILEGE. 

"  Good  name  in  man  or  woman 
Is  the  immediate  jewel  of  their  souls." 

This  is  the  sentiment  which  Shakespeare  makes  lago 
express,  and  this  is  the  feeling  of  the  law.  Recognizing 
the  priceless  value  of  character,  the  law  throws  about  it 
the  mantle  of  protection,  and  holds  to  the  strictest  ac- 
countability him  who  unwarrantably  assails  it. 

The  merchant  also  is  protected,  not  only  in  his  capa- 
city as  a  member  of  society,  but  also  in  his  character  of 
merchant,  and  for  any  reflection  upon  his  business,  even 
though  it  does  not  affect  his  reputation  as  an  individual, 
he  is  held  liable  who  makes  the  same.  "  The  law,"  says 
Odgers,  in  his  treatise  on  the  "  Law  of  Libel  and  Slander,"^ 
"  guards  most  carefully  the  credit  of  all  merchants  and 
traders ;  any  imputation  on  their  solvency,  any  sugges- 
tion that  they  are  in  pecuniary  difficulties,  or  are  attempt- 
ing to  evade  the  operation  of  any  Bankruptcy  Act,  is 
therefore  actionable  per  se." 

In  Harman  vs.  Delany^  the  Court  says :  "  The  law  has 
always  been  very  tender  of  the  reputation  of  tradesmen, 
and  therefore  words  spoken  of  them  in  the  way  of  their 
trade  will  bear  an  action  that  will  not  be  actionable  in 
the  case  of  another  person,  and  if  bare  words  are  so,  it 
will  be  stronger  in  the  case  of  a  libel  in  a  public  news- 
paper which  is  so  diffusive,"  Evidently  the  law  is  strict 
in  guarding  the  reputation  of  merchants.  But  there  are 
exceptions  to  the  general  rule.  "  Circumstances,"  says 
Odgers,  on  page  182  of  the  work  above  mentioned,  "  will 
afford  an  excuse  for  writing  or  speaking  defamatory 
words  whenever  the  occasion  is  such  as  to  cast  upon  the 

'  P.  77.  «  2  Str.  898. 

11 


8  mercantii.h:  agencies. 

defendant  a  duty,  Avli(>thor  legal  or  moral,  of  stating  what 
he  honestly  believes  to  be  the  plaintili's  character,  and 
of  speaking  his  mind  fully  and  freely  concerning  him. 
In  such  a  case  the  occasion  is  said  to  be  privileged,  and 
the  employment  of  defamatory  words  on  such  privileged 
occasions  is,  in  the  interest  of  the  public,  excused." 

According  to  Odgers,  privileged  occasions  are  of  two 
kinds:  — 

1.  Those  absolutely  privileged. 

2.  Those  in  which  the  privilege  is  but  qualified.- 

'•  In  the  first  class  of  cases,"  he  says,  "  it  is  so  much 
to  the  public  interest  that  the  defendant  should  speak 
out  his  mind  fully  and  freely,  that  all  actions  in  respect 
of  words  spoken  thereon  are  absolutely  forbidden,  even 
though  it  be  alleged  that  the  words  were  spoken  falsely, 
knowingly,  and  with  malice."  The  testimony  of  wit- 
nesses, the  utterances  of  legislators,  governors,  and  the 
executive  of  the  nation  come  under  this  head. 

The  second  class  of  cases  may  be  defined  in  the  words 
of  Selden,  J.,  in  giving  the  opinion  of  the  Court  in  the 
case  of  Lewis  vs.  Chapman.^  "  The  term  privileged^'' 
says  the  Court,  "  as  applied  to  a  communication  alleged 
to  be  libellous,  means  simply  that  the  circumstances 
under  whicli  it  was  made  were  such  as  to  repel  the  legal 
inference  of  malice,  and  to  throw  upon  the  plaintiff"  the 
burden  of  offering  some  evidence  of  its  existence  beyond 
the  mere  falsity  of  the  charge."  This  definition  is 
adopted  by  Cooley  in  his  work  on  "  Constitutional  Limi- 
tations."- "  The  cases  falling  within  this  classification," 
says  Cooley,  "  are  those  in  which  a  party  has  a  duty  to 
discharii^e  which  requires  that  he  should  be  allowed  to 
speak  freely  and   fully  that  which  he   believes,  where 

'  16  N.  Y.  373.  '  Pp.  532  et  seg. 

12 


MERCANTILE   AGENCIES.  9 

he  is  himself  directly  interested  in  the  subject-matter  of 
the  communication,  and  makes  it  with  a  view  to  the  pro- 
tection or  advancement  of  his  own  interest,  or  where  he 
is  communicating  confidentially  with  the  person  inte- 
rested in  the  communication,  and  by  Avay  of  advice  or 
admonition." 

In  his  treatise  on  the  "  Law  of  Torts,"  Cooley,  in  defin- 
ing the  second  class  of  privileged  communications,  says : 
"  These  are  cases  privileged,  but  only  to  tliis  extent ; 
that  the  circumstances  are  held  to  preclude  any  pre- 
sumption of  malice,  but  still  leave  the  party  responsible 
if  both  falsehood  and  malice  are  affirmatively  shown." 
Under  this  head,  according  to  Cooley,  confidential  com- 
munications between  one  and  his  professional  adviser, 
whether  legal,  medical,  or  spiritual,  are  privileged.  So 
are  confidential  communications  between  a  principal  and 
his  agent  in  any  matter  pertaining  to  the  business.  In 
his  work  on  "  The  Law  of  Torts,"^  he  says :  "  And  where 
confidential  inquiries  are  made  concerning  the  character 
and  conduct  of  servants,  or  the  responsibility  of  trades- 
men, and  the  like,  by  one  having  an  interest  in  knowing, 
and  of  one  who  may  be  supposed  to  have  had  special 
opportunity  in  his  own  dealings  or  affairs  to  acquire  the 
information,  the  answers  are  in  like  manner  privileged. 
But  if  one  makes  it  his  business  to  furnish  to  others  in- 
formation concerning  tlie  character,  habits,  standing,  and 
responsibility  of  tradesmen,  his  business  is  not  privileged, 
and  he  must  justify  liis  reports  by  the  truth."  In  liis 
treatise  on  "  Constitutional  Limitations,'*^  he  mentions 
answers  to  inquiries  by  one  tradesman  of  another  as  to 
the  solvency  of  a  person  whom  the  inquirer  has  been 
desired  to  trust  as  coming  under  the  class  of  "  privileged 


-r  ST-^ 


p.  217.  2  p,^^53r 

13 


10  MERCANTILE    AGENCIES. 

communications,"  but  in  a  foot-note  he  says,  "  but  the 
reports  of  a  mercantile  agency  to  its  customers  are  not 
privileged." 

Dr.  Francis  Wharton,  in  a  note  to  the  case  of  Trussel 
vs.  Scarlett,^  says :  "  If  the  limitations  of  confidence  are 
thrown  off  by  the  agency,  in  other  words,  if  it  publislies 
to  the  world  the  information  it  collects,  then  it  is  liable 
in  damages  to  parties  whose  character  it  disparages,  or 
whose  standing  it  impugns.  On  the  other  hand,  if  it 
confines  itself  to  the  confidential  communication  of  such 
information  to  its  customers,  then,  if  it  acts  houajide,  and 
without  malice  or  recklessness,  these  communications  are 
privileged,  and  the  defendant,  if  sued  for  a  libel  in 
making  such  communications,  would  be  entitled  to  a 
verdict."  If  we  understand  Ur.  Wharton  correctly,  he 
holds  that  communications  made  to  subscribers  are  privi- 
leged, regardless  of  whether  they  are  interested  in  the 
communication  or  not. 

Is  it  not  surprising  to  find  that  two  eminent  jurists 
have  come  to  such  opposite  conclusions  ? 

In  the  light  of  these  opinions  it  seems  necessary  to 
examine  the  subject  as  thoroughly  and  as  critically  as 
possible  in  order  that  we  may  know  how  the  law  stands. 
Let  us  in  the  first  place  examine  some  important  opin- 
ions of  the  courts  which  have  a  bearing  upon  this  ques- 
tion. 

In  Toogood  vs.  Spyring,"  Parke,  Baron,  says :  "  In 
general,  an  action  lies  for  tlie  malicious  publication  of 
statements  wliicli  are  false  in  fact  and  injurious  to  the 
character  of  another  (within  the  well-known  limits  as  to 
verbal  slander),  and  the  law  considers  such  publication 
as  malicious,  unless  it  is  fairly  made  by  a  person  in  the 

>  18  Fed.  Rep.  214.  »  1  Cr.  M.  &  R.  180. 

14 


MERCANTILE   AGENCIES.  11 

discharge  of  some  public  or  private  duty,  wlicthcr  legal 
or  moral,  or  in  the  conduct  of  his  own  affairs,  in  matters 
where  his  interest  is  concerned.  In  such  cases  the  occa- 
sion prevents  the  inference  of  malice,  which  the  law 
draws  from  unauthorized  communications,  and  affords  a 
qualified  defence  depending  upon  the  absence  of  actual 
malice.  If  fairly  warranted  by  any  reasonable  occasion 
or  exigency,  and  honestly  made,  such  communications 
are  protected  for  the  common  convenience  and  welfare 
of  society ;  and  the  law  has  not  restricted  the  right  to 
make  them  within  narrow  limits." 

In  Harrison -ys.  Bush,^  Lord  Campbell,  C.  J.,  said:  "A 
communication  made  hona  fide  upon  any  subject-matter 
in  which  the  party  communicating  has  an  interest,  or  in 
reference  to  which  he  has  a  duty,  is  privileged,  if  made 
to  a  person  having  a  corresponding  interest  or  duty, 
although  it  contains  criminatory  matter  which,  without 
this  privilege,  would  be  slanderous  and  actionable. 
Duty,  in  the  proposed  canon,  cannot  be  confined  to  legal 
duties  which  may  be  inforced  by  indictment,  action,  or 
mandamus,  but  must  include  moral  and  social  duties  of 
imperfect  obligation." 

In  Gassett  vs.  Gilbert,"  Bigelow,  J.,  said:  "A  party 
cannot  be  held  responsible  for  a  statement  or  publication 
tending  to  disparage  private  character  if  it  is  called  for  by 
the  ordinary  exigencies  of  social  duty,  or  is  necessary  and 
proper  to  enable  him  to  protect  his  own  interest,  or  that 
of  another,  provided  it  is  made  in  good  faith  and  without 
a  wilful  design  to  defame." 

In  Wright  vs.  Woodgate,^  Parke,  Baron,  says :  "  The 
proper  meaning  of  a  privileged  communication  is  only 

1  85  Eng.  Com.  Law,  5  E.  &  B.  oU.  '  6  Gray,  97. 

»  2  Cr.  M.  &  R.  573- 

15 


12  MERCANTILE    AGENCIES. 

this ;  that  the  occasion  on  which  the  communication 
was  made  rebuts  the  inference  2:>rima  facie  arising  from 
a  statement  prejudicial  to  the  character  of  the  phiintiff, 
and  puts  it  upon  him  to  prove  that  there  was  mahce  in 
fact — that  the  defendant  was  actuated  by  motives  of 
personal  spite  or  ill-will,  ind(^pendent  of  the  occasion  on 
which  the  communication  was  made." 

In  Cockayne  vs.  Hodgkisson,^  Parke,  Earon,  says  :  "  I 
have  already  said,  that  every  wilful  and  authorized  pub" 
lication  to  the  injury  of  the  character  of  another  is  a 
libel ;  but  where  the  writer  is  acting  on  any  duty,  legal 
or  moral,  towards  the  person  to  whom  he  writes,  or 
where  he  has,  by  his  situation,  to  protect  the  interests  of 
another,  that  whicli  he  writes  under  such  circumstances 
is  a  privileged  communication." 

In  Coxhead  vs.  llichards,^  Tindal,  C.  J.,  said:  "I 
do  not  find  the  rule  of  law  so  narrowed  and  restricted  by 
any  authority  that  a  person  having  information  materially 
affecting  the  interests  of  another,  and  honestly  communi- 
cating it,  in  the  full  belief  and  with  reasonable  grounds 
for  the  belief  that  it  is  true,  will  not  be  excused,  though 
he  has  no  personal  interest  in  the  subject-matter." 

In  Washburn  vs.  Cooke,^  Bronson,  C.  J.,  says  :  "  Bu 
in  actions  for  defamation,  if  it  appear  that  the  defendant 
had  some  just  occasion  for  speaking  of  the  plaintiff,  malice 
is  not  a  necessary  inference  from  what,  under  other  cir- 
cumstances, would  be  a  slanderous  charge." 

It  is  from  such  words  as  these  that  we  gain  light  in 
our  investis^ations.  It  is  from  such  statements  of  the 
law  that  the  courts  luive  been  able  to  give  a  place  and 
privilege  to  mercantile  agencies.     But  to  what  extent 

'  21  En?.  Com.  Law,  5  C.  «fe  P.  543. 

^  10  Jurist,  984.  '  3  Denio,  110. 

16 


MERCANTILE    AGENCIES.  13 

thoy  have  gone  in  holdinj;  communications  made  by 
these  agencies  privileged,  is  another  question.  The 
cases  upon  this  question  are  not  numerous,  and  we  have 
therefore  deemed  it  best  to  present  as  fully  as  possible 
the  facts  in  each  particular  case,  and  extracts  from  the 
opinions  of  the  courts. 

The  case  of  Goldstein  vs.  Foss,  et  al.^  is  the  earliest 
case  on  this  question.  It  was  the  duty  of  Foss,  who  was 
the  Secretary  of  "The  Society  for  the  Protection  of 
Trade  against  Swindlers  and  Sharpers,"  to  send  to  mem- 
bers printed  reports  for  the  purpose  of  denoting  and 
signifying  to  the  members  the  names  of  such  persons  as 
were  deemed  and  considered  swindlers  and  sharpers, 
and  improper  persons  to  be  balloted  for  as  members  of 
the  society.  Goldstein's  name  appeared  on  one  of  the 
circulars  which  was  sent  to  members.  This  was  held 
to  be  libellous,  and  was  not  protected  as  a  privileged  com- 
munication. 

Fleming  vs.  Newton^  came  before  the  House  of  Lords 
in  1848.  The  appellants  were  the  directors  of  the  Scot- 
tish Mercantile  Society  and  the  printers  to  that  body. 
The  society  had  been  formed  of  merchants  and  traders, 
and  its  object  was  declared  to  be  "  to  concentrate  and 
bring  together,  from  time  to  time,  a  body  of  information 
for  the  exclusive  use  of  the  members,  relating  to  the 
mercantile  credit  of  the  trading  community,  with  a  view 
of  diminishing  the  hazards  to  which  mercantile  men 
were  exposed."  The  third  rule  of  the  society  was  to  the 
following  effect :  "  The  secretary  shall  collect  from  the 
general  records  of  protests,  hornings,  and  other  records 
of  diligences  kept  for  Scotland  at  Edinburgh,  the  names 

'  12  En;i.  Com.  Law,  2  C.  &  P.  252  (1826). 
»  1  H.  L.  C.  3G2. 

17 


14  MERCANTILE    AGENCIES. 

and  designations  of  debtors  in  trade,  and  otherwise,  ap- 
pearing in  these  records.  .  .  .  The  whole  information  so 
collected  shall  be  printed  and  forwarded  monthly,  or 
oftener,  as  the  general  committee  of  directors  shall  think 
proper,  to  each  member  respectively."  The  fifth  rule 
declared  that  "  the  information  contained  in  the  printed 
record,  so  forwarded  to  members,  shall  be  confined  to 
themselves  for  business  purposes,  and  no  member  shall 
communicate  or  use  such  information  for  other  purposes, 
under  penalty  of  deprivation  of  membership."  The  so- 
ciety printed  the  information  thus  obtained  in  a  book 
called  "The  Scottish  Mercantile  Society's  Record."  This 
book  was  known  among  the  trading  community  as  the 
"Black  List."  Newton  had  dishonored  two  promissory 
notes,  and  Miller,  the  payee,  had  them  duly  protested, 
and  the  protests  registered  according  to  the  laws  of 
Scotland.  The  society  had  taken  a  copy  of  the  register, 
and  Newton's  name  was  about  to  be  published  in  the 
society's  book,  which  was  a  mere  copy  of  the  register. 
Newton  applied  for  an  interdict  to  prevent  the  publi- 
cation, and  it  was  decreed.  On  appeal  the  case  came 
before  the  House  of  Lords.  A  number  of  points  were 
discussed.  On  the  question  of  publication  and  libel 
the  Lord  Chancellor  said :  "  Tlie  appellants  are  en- 
gaged in  mercantile  affairs,  in  which  their  security  and 
success  must  greatly  depend  upon  a  knowledge  of  the 
pecuniary  transactions  and  credit  of  others.  That  each 
of  them  mii^ht  cfo  or  send  to  the  office  and  search  the  re- 
gister  is  not  disputed,  and  that  they  might  communicate 
to  each  otlu^r  what  they  had  found  there  is  equally 
certain.  What  they  have  done  is  only  doing  this  by  a 
common  agent  and  giving  the  information  by  means  of 
printing.  No  doubt,  if  the  matter  be  a  libel,  this  is  a 
publication  of  it,  but  the  transaction  disproves  any 
lb 


MERCANTILE   AGENCIES.  15 

malice,  and  shows  a  legitimate  object  for  the  act  donr." 
Directions  were  given  to  the  lower  court  to  recall  the 
interdict,  with  costs  to  the  appelhuit.  The  decision  in 
this  case,  allowing  the  society  to  publish  Newton's  name 
in  its  book,  was  based  upon  the  fact  that  the  society  was 
merely  copying  from  the  public  record. 

A  writer  in  the  "  Albany  Law  Journal"^  says  that,  so 
far  as  he  has  been  able  to  ascertain,  the  earliest  case  in 
this  country  is  that  of  Billings  vs.  Russell,-  tried  before 
Dewey,  J.,  at  nisi  prius.  He  is  probably  correct  in  this 
statement.  In  that  case  "the  plaintiff  was  a  merchant 
and  the  defendant  the  proprietor  of  the  Boston  '  Mer- 
cantile Agency.'  The  defendant  had  received  from  his 
agent,  on  what  was  supposed  to  be  reliable  authority,  a  re- 
port injurious  to  the  credit  of  the  plaintiff.  This  report 
had  been  read  by  defendant's  clerks  to  regular  subscrib- 
ers to  defendant's  agency,  who  were  interested  in  know- 
ing the  standing  of  the  plaintiff.  The  report  was  in- 
correct and  unjust.  The  court  charged  that  if  the 
defendant,  as  the  constituted  agent  of  a  commercial 
house,  upon  the  application  of  his  principal,  made  in- 
quiries at  the  proper  places  and  under  proper  and  rea- 
sonable guards,  to  insure  accuracy  and  privacy  as  to 
the  information  thus  obtained,  and  the  information 
which  he  thus  obtained  was  repeated  hona  fide  to  his 
employer,  and  to  him  alone,  as  tlie  result  of  such  in- 
quiries, and  for  the  purpose  of  governing  his  conduct  in 
his  business  transactions  with  the  party  as  to  whom  the 
inquiry  was  made,  such  communication  may  be  justifia- 
ble as  a  confidential  communication  and  the  defendant 
would  not  be  responsible,  although  the  information  was 
incorrect  and  unfounded  in  fact,  the  defendant  acting  in 

•  Vol.  8,  p.  Q>o.  »  8  Boston  Law  Reporter,  699. 

19 


16  MERCANTILE   AGENCIES. 

good  faith,  and  believing  it  to  be  true  at  the  time  he 
communicated  it ;  but  that  the  privilege  of  a  confiden- 
tial communication  would  be  confined  to  the  agent,  and 
if  the  principal  repeated  it  to  others  he  would  be  re- 
sponsible." 

The  case  of  Taylor  vs.  Church^  came  before  the 
General  Term  of  the  Court  of  Common  Pleas  of  New 
York  in  1851.  The  jury  had  rendered  a  verdict  for 
the  plaintiffs  of  ^6000  damages.  An  appeal  was  taken 
from  the  judgment  to  the  General  Term  of  this  Court. 
The  fbllowini^  is  a  statement  of  the  facts  in  the  case : 
Information  respecting  a  firm  doing  business  in  a  South- 
ern State  was  communicated  by  the  defendant  to  a  per- 
son by  whom  he  was  employed  for  the  purpose,  and 
who  was  directly  interested  in  ascertaining  their  credit. 
The  information  was  then  printed  by  the  defendant  and 
furnished  in  the  course  of  his  business  to  merchants  hav- 
ing no  immediate  interest  in  learning  the  standing  of  the 
said  firm,  but  who  were  in  the  habit  of  selling  goods  to 
persons  in  the  Southern  States,  and  wished  the  record  for 
future  reference.  The  defendant  in  this  suit  was  the 
proprietor  of  what  is  now  known  as  a  commercial  agency, 
and  as  such  conducted  a  business  which  is  described  in 
the  opinion  of  the  court.  He  was  sued  by  the  plaintiffs 
for  injuries  to  the  credit  and  standing  of  their  firm  from 
a  libel  contained  in  the  following  words  : — 

"Taylor,  Hale,  and  Murdock,  Columbus,  Miss. 

"  This  concern  does  not  seem  to  thrive  here.  M.  is 
capable  in  some  respects,  but  is  not  a  successful  mana- 
ger. He  is  remarkably  systematic  and  particular  in 
details,  and  a  superior  office  clerk,  but  lacks  the  other 
and  more  essential  requisites  of  a  good  merchant.     H.  is 

»  1  E.  D.  Smith's  Rep.  279. 
20 


MERCANTILE   AGENCIES.  17 

rather  a  nesrativc  character.  Taylor  resides  in  New 
York,  and  sends  out  undesirable,  ill-assorted  odds  and 
ends  and  unsalable  stock.  He  was  formerly  with  Beri 
Kini,^  and  I  am  told  is  an  unprincipled  character."  The 
complaint  alleges  that  the  plaintiffs  were  merchants,  and 
co-partners  in  trade  at  Columbus,  Miss.,  at  the  time  of 
the  publication  of  the  alleged  libel ;  that  the  same  was 
printed  by  the  defendant  of  and  concerning  their  firm, 
and  circulated  by  him  to  and  among  divers  merchants  of 
and  from  whom  the  plaintiffs  were  in  the  habit  of  pur- 
chasing goods.  The  answer  sets  up  that  the  defendant 
was  eniraored  in  ascertainins:  the  credit  and  standing  of 
merchants  residing  and  doing  business  in  the  Southern 
and  Southwestern  States ;  that  the  publication  was 
written  by  him  at  Columbus  while  in  the  discharge  of 
his  said  duties,  and  forwarded  to  a  mercantile  firm  at 
New  York  for  the  use  of  that  firm  and  thirty-six  other 
subscribers;  that  the  plaintiffs  were  unknown  to  him  at 
the  time,  and  it  was  information  he  received  which  he 
deemed  reliable ;  that  it  was  printed  for  the  more  con- 
venient distribution  among  said  subscribers,  and  was  a 
privileged  communication.  The  proof  was  that  the 
defendant  sold  and  distributed  it  among  others  besides 
those  subscribers.  This  was  one  of  the  early  cases. 
Mercantile  agencies  were  yet  new  to  the  community. 
The  Court  feels  the  importance  of  the  occasion,  and 
gives  an  elaborate  opinion  covering  the  whole  question. 
We  quote  liberally  from  the  opinion  of  Ingraham,  First 
Justice,  because  his  language  is  both  interesting  and 
instructive.  He  says:  "This  action  is  brought  to  re- 
cover damages  for  an  alleged  libel  contained  in  a  printed 
paper  which  was  circulated  by  the  defendant.  The 
defendant  was  employed  by  certain  merchants  and  mer- 
cantile firms  to  obtain  and  communicate  intelligence  in 

21 


18  MERCANTILE   ANENCIES. 

regard  to  tlie  standing  and  responsibility  of  merchants 
and  others  doing  business  at  the  South  and  West,  and 
after  obtaining  such  infornuition  he  caused  the  same  to 
be  printed  and  distributed  in  loose  sheets,  and  subse- 
quently in  a  book,  to  such  persons  as  became,  or  were  at 
the  time,  subscribers  to  his  agency.     He  was  in  fact  the 
proprietor  of  an  agency  for  giving  information  to  such  as 
were  willing  to  pay  for  it  in  regard  to  the  character  and 
standing  of  Southern  and  Western  merchants.     In  the 
course   of  such   publication   the   article   which  is   com- 
plained  of  as   libellous   was   published   concerning   the 
plaintiffs.     The  business  is  one  of  recent  date,  novel  in 
its  character,  and  the  questions  which  have  been  pre- 
sented to  us  in  this  argument  are  important,  not  only  to 
the  parties  immediately  concerned,  but  to  the  mercantile 
community.      That   such   establishments,  properly  con- 
ducted, and  giving  only  correct  information,  are  of  the 
highest  importance  to  those  who  require  such  communi- 
cations, no  one  can  deny ;   but  it  is  also  evident  that  if 
carelessly  conducted,  or  if  untrue  reports  are  furnished, 
even  through  error  or  mistake,  the  consequence  to  those 
who  are  thus  misrepresented  may  be  very  injurious,  and 
sometimes  destructive  to  their  reputation,  character,  and 
credit.     We  have  felt  the  importance  of  these  considera- 
tions, both  in  regard  to  those  who  need  the  information, 
and  also  in  reference  to  a  continuance  of  such  agencies, 
in  the  investigation  of  the  questions  before  us." 

Again :  "  The  next  inquiry  is,  was  this  libel  a  privileged 
communication'?  If  it  was,  then  it  must  be  conceded  that 
there  is  no  ground  upon  which  the  verdict  can  be  upheld. 
No  special  damage  is  shown,  nor  is  any  express  malice 
proven.  The  subsequent  report  in  1847  could  not  be 
considered  as  furnishing  such  evidence.  That  publica- 
tion would  be  equally  privileged  with  the  first,  and 
22 


MERCANTILE    AGENCIES.  19 

express  malice  is  not  to  be  inferred  from  a  second  publi- 
cation of  privileged  matters,  without  some  stronger  evi- 
dence than  the  mere  republication.  If  this  publication 
had  been  in  answer  to  an  inquiry  from  a  merchant  having 
an  interest  in  knowing  the  condition  of  this  firm,  and  had 
extended  no  further  than  the  form  or  answer  to  the  appli- 
cation, it  might  be  included  within  the  protection  of 
privileged  communications.^  It  is  not,  however,  neces- 
sary to  the  decision  of  this  case  that  we  should  now 
decide  whether,  if  the  communication  had  been  confined 
to  tlie  person  making  the  inquiry,  it  would  have  been 
privileged.  The  publication  was  far  more  extended  in 
this  case." 

Again :  "  The  question  then  on  this  part  of  the  case 
is,  whether  a  communication  made  for  the  purpose  which 
brings  it  within  the  class  of  those  which  are  privileged, 
may  be  subsequently  printed  and  circulated  to  other  per- 
sons, who,  at  the  time  of  the  publication,  have  no  interest 
in  knowing  the  facts  stated,  and  who  purchase  tlie  work 
for  the  purpose  of  reference  at  a  future  period,  if  they 
should  thereafter  have  occasion  so  to  do.  The  benefit  of 
this  exception  on  account  of  privilege  from  the  ordinary 
rule  has  never  been  extended  so  far,  nor  do  I  know  of 
any  case  that  warrants  such  a  doctrine." 

Again :  "  No  case  that  has  been  cited  protects  a  com- 
munication made  for  the  mere  purpose  of  profit,  and  to 
persons  at  the  time  having  no  interest  in  knowing,  nor 
can  such  a  rule  be  maintained  upon  principle.  The  only 
ground  of  privileged  communication  is  interest,  eith(>r  in 
the  party  giving  or  receiving  the  information,  but  it  is 
not  to  be  found  in  a  case  where  no  such  interest  exists 
at  the   time   the  communication   was   made.     Any  ex- 

'  3  How.  2G6,  and  31  Eng.  Com.  Law,  5  A.  &  E.  53o. 

23 


20  MERCANTILE   ANENCIES. 

tension  of  the  rule  would  be  frauijjht  with  danger  to 
that  class  of  busmess  men  to  whom  credit  is  of  any 
value." 

Again :  "  As  no  one  can  guard  against  the  effect  of 
such  secret  publications,  the  least  that  can  be  required 
in  regard  to  them  is,  to  hold  the  party  who,  as  a  matter 
'  of  profit,  prints  and  publishes  them,  to  the  obligation  of 
seeing  that  what  he  thus  privately  circulates  is  founded 
in  truth.  The  convenience  and  protection  of  those  who 
give  credit  is  not  to  be  considered  as  paramount  to  the 
credit  and  solvency  of  those  who  are  the  subjects  of  these 
reports.  The  rule  which  we  would  adopt  in  these  cases 
is  tliis,  while  any  one  who  has  an  interest  in  giving  or 
receiving  the  information  has  a  right  to  claim  that  the 
same  is  a  privileged  communication,  if  made  without 
maUce,  yet,  when  the  publication  is  extended  beyond 
the  parties  directly  interested,  its  privileged  character  is 
at  an  end,  and  the  man  or  firm  whose  credit  is  injured 
by  such  publication  lias  a  right  to  ask  from  the  publisher 
full  indemnity  for  the  injuries  sustained." 

Again :  "  There  can  be  no  difterencc,  as  suggested  on 
the  argument,  between  making  the  communication  in 
writing  or  printing.  It  may  well  be  doubted  whether 
either  mode  is  justifiable  if  a  third  person  is  employed 
to  do  the  work.  If  such  a  communication  can  be  privi- 
leged, it  must  be  made  in  a  private  manner ;  and  if  the 
defendant  was  justified  in  making  it,  he  should  have 
furnished  the  information  himself,  and  not  have  com- 
mitted the  duty  to  others.  It  is  not  necessary,  however, 
to  decide  this  point.  The  view  I  have  taken  of  the 
question  whether  tlie  communication  was  privileged, 
renders  it  immaterial  whether  the  copies  were  written 
or  printed.     The  judgment  must  be  affirmed." 

24 


MERCANTILE    AGENCIES. 


21 


This  case  came  before  the  Court  of  Appeals  in  1853.^ 
The  judgment  was  reversed  on  one  point.  As  to  the 
matter  of  privilege,  Jewett,  J.,  says :  "  I  think  the  Court 
below  was  right  in  holding  that  the  publication  could 
not  be  included  within  the  protection  of  privileged  com- 
munications. In  this  case  the  communications  were  not 
even  confined  to  the  persons  making  the  inquiries  of  the 
defendant.  The  libel  complained  of  was  printed  by  his 
procurement,  and  distributed  by  him  to  persons  who  had 
no  special  interest  in  being  informed  of  the  condition  of 
the  plaintiff's  firm."  When  the  formal  question  was 
put  to  the  judges :  "  Was  the  alleged  libel  a  privileged 
communication  r'  All  the  judges  who  heard  the  argu- 
ment were  of  the  opinion  that  it  was  not. 

We  Avish  to  call  special  attention  to  the  last  paragraph 
quoted  by  us  from  the  opinion  of  Justice  Ingraham.  He 
doubts  whether  third  persons  can  be  employed  to  do  the 
work.  He  thinks  "  the  defendant  should  have  furnished 
the  information  himself,  and  not  have  committed  the 
duty  to  others."  This  objection  will  again  appear.  In 
fact,  the  next  case  we  shall  mention  was  decided  on  that 
very  point.  We  refer  to  the  case  of  John  B.  and  Horace 
Beardsley  vs.  Tappan.^  This  suit  was  tried  before  Judge 
Betts  of  the  United  States  District  Court  in  the  city  of 
New  York.  W^e  have  not  been  able  to  find  any  report 
of  the  proceedings  in  the  District  Court.  It  has,  how- 
ever, been  our  pleasure  to  see  Mr.  Douglass,  who  was  at 
that  time  in  Tappan's  employ,  and  who  was  a  witness  in 
the  case.  We  have  not  endeavored  to  obtain  tlie  details, 
but  we  are  informed  by  him  that  the  question  involved 
in  that  case  was  as  to  whether  those  wlio  establislicd 
mercantile  agencies  could  have  clerks  and  correspondents 

1  8  N.  Y.  452.  *  5  Blatch.  497. 

25 


22  MERCANTILE    AGENCIES. 

to  aid  them  or  not,  and  bis  statement  is  supported  by 
tbe  opinion  of  Judge  Nelson,  wbich  we  sball   take  tbe 
liberty  of  presenting  verbatim.     During  the  cross-exami- 
nation of  Mr.  Douglass,  he  was  asked  whether  Tappan 
had  at  the  time  of  the  alleged  libel  an  agent  or  a  cor- 
respondent in  Norwalk,  Ohio  (the  town  in  whicli  the 
13eardsleys  were  established  in  business),  and  if  so,  who 
he  was.     Objection  was  made  by  Tappan's  counsel,  but 
was  overruled.     The  question  was  then  put.     The  wit- 
ness declined  to  answer.     Persisting  in  his  refusal  he 
was  sent  to  Ludlow  Street  Jail  for  being  guilty  of  con- 
tempt of  court,  and  remained  there  for  twenty  days.    The 
jury  returned  a  verdict  for  $10,000.     Mr.  Douglass  in- 
forms us  that  his  determined  refusal  to  answer  the  ques- 
tion put  to  him  aided  greatly  in  establishing  the  agencies 
in  the  confidence  of  the  public,  because  men  saw  that 
they  could  give  information  to  the  agencies,  and  that 
these  would  not  betray  the  confidence  reposed  in  them. 
The  judgment  for  the  plaintiff  in  this  case  is,  of  course, 
an  exception,  and  must  be  attributed  to  the  fact  that  the 
courts  and  the  public  were  not  yet  educated  up  to  the 
needs  and  objects  of  the  mercantile  agencies.     The  case 
was  taken  to  the  United  States  Circuit  Court,  and  Judge 
Nelson  affirmed  the  jiulgracnt.     His  opinion  shows  the 
feeling  at  that  time.     He  says  :   "  The  defendant  resided 
in  New  York,  and  had  established  in  that  city  a  mercan- 
tile agency.  .  .   .  Defendant  had  some  twenty  clerks  who 
participated  in  the  business  of  the  establishment,  and 
who  were,  of  course,  privy  to  the  information  obtained, 
whether  favorable  or  unfavorable  to  tlie   character  and 
credit  of  the  country  merchant,  and  who  participated  in 
the  communication  of  the  information  to  their  customers 
or  their  customers'  clerks.    The  defendant  communicated 
through  his   clerks  to   several    customers  and  to   their 
26 


MERCANTILE    AGENCIES.  23 

clerks  facts  seriously  affecting  the  credit  of  the  plaintiff's 
house ;  and  the  main  question  in  the  case  on  the  merits 
is,  whether  or  not  he  is  exempt  from  the  consequences 
of  the  publication  on  the  ground  of  its  privileged  cliar- 
acter.  The  Court  charged  the  jury  that  if  the  defendant 
himself  communicated  the  information  to  a  person  ap- 
plying to  him  for  the  purpose  in  good  faith,  the  commu- 
nication might  have  been  a  privileged  one,  but  that  the 
publicity  given  to  it  by  recording  the  libellous  words  in 
a  book  to  which  others  had  access,  and  to  whom  they 
were  communicated,  though  standing  in  the  relation  of 
clerks,  deprived  the  communication  of  its  otherwise 
privih^ged  character.  This  is  no  doubt  a  very  important 
question,  and  one  involving  in  its  practical  operation, 
whichever  way  it  may  be  decided,  interests  of  very  great 
magnitude.  On  the  one  hand,  to  legalize  these  estab- 
lishments in  the  manner  and  to  the  extent  used  by  the 
defendant,  is  placing  one  portion  of  the  mercantile  com- 
munity under  an  organized  system  of  espionage  and  in- 
quisition for  the  benefit  of  the  other,  exposed,  from  the 
very  nature  of  the  organization,  to  perversion  and  abuse ; 
and,  on  the  other,  to  refuse  to  legalize  them,  may  be  re- 
stricting injuriously  the  right  of  inquiring  into  the  cliar- 
acter  and  standing  of  the  customer  asking  for  credit  in 
his  business  transactions.  I  am  strongly  inclined  to 
think  that  if  the  establishments  are  to  be  upheld  at  all, 
the  limitation  attached  to  them  by  the  court  below  is 
not  unreasonable,  to  wit,  that  it  must  be  an  individual 
transaction,  and  not  an  establishment  conducted  by  an 
unlimited  number  of  partners  and  clerks.  The  prin- 
ciple upon  which  prvileged  communications  rest,  whicli 
of  tluMuselves  would  otherwise  be  libellous,  imports  con- 
fidence and  secrecy  between  individuals,  and  is  incon- 
sistent with  the  idea  of  a  communication  made  by  a 

•27 


24  MERCANTILE   AGENCIES. 

society  or  a  congro<^atioii  of  persons,  or  by  a  private 
company,  or  a  corporate  body."  On  appeal  the  case  was 
taken  to  the  Supreme  Court  of  the  United  States,  and 
the  judgment  was  reversed.  The  Court  does  not  seem 
to  have  thouglit  it  necessary  to  touch  on  the  cpiestion 
of  privileged  communications,  but  reversed  the  judgment 
on  other  grounds.' 

Ormsby  vs.  Douglass-  is  the  title  of  a  case  which  was 
first  tried  in  1858  in  the  Supreme  Court  of  New  York 
City.  It  was  a  case  to  recover  damages  for  slander.  At 
the  close  of  the  plaintiff's  evidence,  the  defendant  moved 
for  a  nonsuit  and  a  dismissal  of  the  complaint,  on  the 
ground  that  the  words  spoken  by  the  defendant  concern- 
ing the  plaintiff  appeared  to  have  been  spoken  confiden- 
tially, in  the  course  of  the  defendant's  employment,  to 
one  of  his  employers  on  the  application  of  the  latter, 
who  had  need  of  the  information,  for  the  purpose  of  gov- 
erning his  discretion  in  his  business,  and  that  under  the 
circumstances  the  communication  was  not  unlawful,  there 
being  no  evidence  of  malice  or  bad  fiiith.  The  Court 
granted  the  motion.  A  new  trial  was  denied  at  the 
General  Term,  and  the  case  was  carried  to  the  Court  of 
Appeals. 

Douglass  kept  a  mercantile  agency  in  New  York  City. 
By  the  terms  of  subscription,  which  constituted  the  con- 
tract between  the  defendant  and  the  person  to  whom  the 
alleged  slanderous  words  were  uttered,  all  information 
was  considered  strictly  confidential,  and  furnished  only 
for  the  use  of  subscribers,  and  was  not  to  be  communi- 
cated to  any  other  person.  In  July  or  August,  1854, 
one  Benton,  a  subscriber,  who  held  a  note  endorsed  by 
the  plaintiff,  presented  a  written  call  for  information  as 

»  10  Wallace,  427.  »  37  N.  Y.  484. 

28 


MERCANTILE   AGENCIES.  25 

to  the  credit,  responsibility,  etc.,  of  the  plaintiff.  The 
book  was  examined  by  the  clerks,  and  after  consultinjjf 
defendant,  and  some  objection  by  defendant  to  reporting 
in  writing,  becanse  the  report  was  bad,  and  a  further 
conversation  with  Benton,  the  defendant  stated  that 
Ormsby  was  a  man  of  no  responsibility ;  he  was  a  bad 
man,  and  worked  for  counterfeiters,  and  was  a  counter- 
feiter. Afterwards,  in  another  conversation,  after  plain- 
tiff's attorney  had  written  a  letter  to  the  defendant, 
Benton  asked  defendant  if  he  had  made  further  inqui- 
ries, and  the  result,  and  he  said  he  had,  and  that  the 
report  was  not  so  much  out  of  the  way  after  all.  He 
also  stated  that  he  had  given  the  report  to  some  four  or 
five  other  persons.  Miller,  J.,  said :  "  It  is  said  that  the 
defendant  falsely  charged  the  plaintiff  with  a  crime,  and 
that  the  answer  of  the  defendant  to  the  inquiry  made  was 
not  responsive  to  the  question  put.  It  is  true  that  the 
report  made  embraced  a  charge  of  a  criminal  offence  ;  but 
it  was,  I  think,  directly  responsive  to  the  question  asked. 
It  related  to  the  standing  of  the  party.  It  affected  his 
responsibility  as  a  business  man  and  his  financial  credit 
and  character.  It  had  much  to  do  with  tlie  question 
whether,  as  a  business  man,  he  was  entitled  to  credit  and 
confidence,  and  to  what  extent.  It  was  in  fact  what  the 
witness  inquired  for.  ...  It  was  not  an  allegation  or 
charge  made  by  the  defendant,  but  a  report  of  informa- 
tion he  had  obtained  in  the  due  course  of  his  business, 
and  which  had  been  entered  upon  his  books.  He  merely 
communicated  to  a  person,  who  had  a  right  to  demand  it, 
such  information  as  he  had,  including  a  fact  within  the 
range  of  inquiry  made.  Surely,  if  any  communication 
of  this  kind  made  in  good  faith  is  privileged,  then  the 
whole  is  protected  as  much  as  any  part  of  it,  and    it 


29 


26  MERCANTILE    AGENCIES. 

cannot  well  be  urged  that  there  is  malice  because  the 
whole  truth  is  stated  and  a  portion  of  it  is  criminatory," 

Asrain :  "  If  the  allci2:ed  slanderous  words  were  com- 
municated  to  other  persons  besides  the  witness,  the 
surrounding  circumstances  evince  that  it  was  in  good 
faith  and  confidentially,  to  those  who  had  a  right  to 
require  it,  and  where  it  would  be  protected  as  a  privi- 
lejjed  communication." 

Asrain :  "  The  business  in  which  the  defendant  is 
engaged  is  sanctioned  by  the  usages  of  commercial  com- 
munities, and  the  proof  in  this  case  fails  to  establish  that 
he  transgressed  any  rule  of  law  in  its  transaction." 
WoodruflF,  J.,  from  whose  opinion  in  this  case  we  quoted 
when  treating  of  "  The  Question  of  Agency,"  after  review- 
ing a  line  of  authorities,  says  :  "  Upon  the  same  general 
principle,  merchants  have  an  interest  in  knowing,  and 
have  a  right  to  know,  the  character  of  their  dealers  and 
of  those  who  propose  to  deal  with  them,  and  of  those 
upon  whose  standing  and  responsibility,  in  the  course  of 
their  business,  they  have  occasion  to  rely.  As  a  neces- 
sary consequence  they  may  make  inquiries  of  other 
merchants,  or  of  any  person  who  may  have  information; 
and  if  such  merchant,  or  other  person,  in  good  faith  com- 
municates the  information  which  he  has,  or  thinks  he 
has,  the  communication  is  privileged." 

Again :  "  In  my  opinion  the  right  of  the  plaintiff  to 
recover  does  not  at  all  depend  on  the  question  whether 
the  defendant  was  pursuing  this  business  for  gain,  but 
on  the  same  principle  as  if  he  had  been  in  the  same 
business  with  the  subscriber  who  applied  to  him  and 
had  made  the  same  communication."  The  judgment 
was  affirmed. 

In  the  first  volume  of  the  "Albany  Law  Journal"^  we 

30  ^  P.  323. 


MERCANTILK    AGENCIES.  27 

find  an  acconnt  of  a  case  wliich  was  tried  in  September, 
1870,  before  the  Chenango  Circuit  Court.  It  appears 
that  one  Gilbert  received  a  letter  with  printed  questions 
from  J.  M.  Bradstreet  &  Sons'  Mercantile  Agency, 
inquiring  as  to  the  standing,  character,  and  financial 
ability  of  a  party  by  the  name  of  Sherwood;  and  this 
letter  he  ansAvered.  Sherwood  sued  him  for  libel  for 
matter  contained  in  that  answer.  The  Judsre  charjjed 
the  jury  that  the  communication  was  not  privileged.  It 
was  ruled  that  the  protection  which  is  given  to  the  pro- 
prietors of  a  mercantile  agency  in  reporting  the  standing 
of  a  party  to  one  of  its  customers  (as  laid  down  in  Ormsby 
vs.  Douglass)  is  not  given  to  the  country  correspondent 
of  tlie  agency.  It  is  strange  that  this  case  was  not 
appealed  by  the  defendant.  If  it  was,  we  have  not  met 
it  in  our  investigations. 

The  Commonwealth  I's.  Stacey^  was  a  criminal  action 
for  libel,  brought  in  1871  against  one  Stacey,  who  was 
probably  the  Philadelphia  representative  of  R.  G.  Dun 
&  Co.  The  publication  which  was  made  the  foundation 
of  this  indictment  was  as  follows  : 

"  Mercantile  Agency  ;  notification  sheet,  R.  G.  Dun  & 
Co.,  proprietors.  Thursday,  ]March  3d,  1870.  No.  9. 
Strictly  confidential.  Subscriber  to  reference  book. 
We  have  information  which  changes  the  ratings  of  the 
undermentioned  names.  An  indication  that  a  change 
has  occurred  should  be  made  in  your  book  in  all  cases 
by  making  a  dash  ( — )  against  your  name.  If  specially 
interested  in  any  of  the  parties,  particulars  may  be 
obtained  at  our  office.  These  notifications  are  confined 
strictly  to  changes  materially  affecting  the  ratings  in  our 
reference  book.     The  insertion  of  a  name  herein  does 

1  8  Phila.  G17. 

31 


28  MERCANTILE   AGENCIES. 

not  always  imply  a  failure,  but  simply  that  circumstances 
have  occurred,  the  particulars  ot"  which  should  be  olv 
tained  by  parties  interested.  Pennsylvania,  103,  O'Brien 
&  Cahill,  shoes,  Philadelphia." 

This  notification  sheet  had  been  sent  to  all  the  agen- 
cy's subscribers.  The  indictment  was  demurred  to,  and 
the  report  details  the  opinion  of  the  Court  on  the  de- 
murrer. The  Court,  Allison,  P.  J.,  says  :  "  It  is  further 
assigned  for  demurrer  against  the  bill  that  the  matter  set 
forth  is  on  its  face  a  privileged  communication,  made  in 
the  performance  of  an  obligation  and  duty,  being  a  confi- 
dential communication  made  by  a  mercantile  agency  to 
subscribers  who  employed  the  agency  for  the  purpose  of 
supplying  them  with  information  for  their  use  in  the 
management  of  their  business.  A  communication  is 
privileged,  even  though  it  be  defamatory,  where  there  is 
an  interest  or  duty  to  make  the  matter  complained  of 
known,  if  it  is  done  hona  fide  and  without  malice  : 
Moore  vs.  Farrall,^  Shipley  vs.  Todhunter.  "^ 

Again :  "  The  indictment  before  us  is  founded  on  a 
communication  made  to  only  one  member  of  the  associa- 
tion, so  far  as  we  have  information  from  the  libel  itself, 
and  it  would  be  a  good  defence  to  the  charge  of  publish- 
ing a  malicious  libel,  to  show  that  the  paper  was  sent  to 
but  one  person,  who  was  interested  in  knowing  all  that 
is  stated,  or  referred  to  in  the  communication,  as  to  the 
ratings  of  0'P>ricn  &  Cahill,  and  that  the  publication 
was  without  malice,  the  defendant  having  knowledge  of 
such  facts  as  warranted  him  in  making  the  statement 
contained  in  the  communication,  or  having  reason  to 
believe  them  to  be  true,  made  them  to  persons  who  were 
interested  in  obtaining  the  information.     But  we  cannot 

'  21  Eng.  Com.  Law,  4  B.  &  Ad.  871. 
*  32  Eng.  Com.  Law,  7  C.  &  P.  680. 
32 


MERCANTILE    AGENCIES.  29 

agree  with  the  position  taken  by  the  defendant,  tliat  he- 
cause  he  is  connected  witii  a  mercantile  agency  h(;  may 
communicate  to  every  person  who  becomes  a  subscriber 
to  his  agency  statements  prejudicial  to  the  business  or 
moral  standing  of  the  merchants  of  the  land,  whether 
the  persons  to  whom  the  information  is  sent  have  an  in- 
terest in  receiving  it  or  not.     In  any  case  in  which  they 
have  such  an  interest,  and  the  agency  have  come  under 
obligations    to    perform   a  duty  of  tliis    kind,  it   would 
doubtless  be  regarded  as  a  privileged  communication  if, 
without  malice,  facts  are  communicated  which  are  neces- 
sary for  the  protection  or  proper  for  the  information  of 
the  persons  to  whom  they  are  sent.     And  this  was  the 
ruling  of  the  court  in  the  case  of  Lawless  vs.  Anglo- 
Egyptian  Cotton  &  Oil  Co.  ;^  there  every  person  to  whom 
the  circular  was  sent,  having  an  interest  in  the  business 
of  the   association,  of  which  he  was  a  member,  was  en- 
titled to  be  informed  of  the  transactions  of  the  body,  the 
publication  of  which  was  charged  to  be  libellous.     But 
can  anything  like  this  with  fairness  be  claimed  of  an 
association  whose  members  are  scattered   over   all   the 
land,  but  a  small  portion  of  whom  can  have  any  interest 
in  knowing  the  ratings,  as  they  are  called,  of  the  par- 
ticular names  which  are  periodically  sent  out  with  such 
remarks  as  are  calculated  to  injure  their  reputation  and 
business  credit  V 

Again :  "  There  is  no  great  hardship  imposed  upon 
an  agency  of  this  kind  if  they  are  required  to  know  be- 
forehand that  their  statements  are  true,  and  that  the 
person  to  whom  they  are  sent  has  an  interest  in  receiv- 
ing the  information  ;  and  this  could  be  accomplished  by 
requiring  every  subscriber  to  furnish  to  the  agency  from 


'  L.  R.  4  Q.  B.  262. 

33 


30  MERCANTILE    AGENCIES. 

time  to  tim(^  the  names  of  the  firms  with  whom  tliey 
have  established  business  relations,  or  who  may  have 
applied  to  tliein  for  credit."  This  ground  of  demurrer 
was  overruled. 

In  18T1  the  case  of  Sunderliu  et  al.  vs.  Bradstreet^ 
came  before  the  Court  of  Appeals.  Sunderlin  et  al. 
were  merchants  doing  business  in  the  City  of  Rochester. 
Bradstreet  et  al.  were  the  proprietors  of  the  well-known 
"  ^Mcu'cantile  Agency."  One  of  their  publications  was  a 
weekly  sheet  of  corrections  which  was  sent  to  their  sub- 
scribers in  the  city  of  New  York  by  private  messenger, 
and  in  tlie  country  by  mail.  Between  three  and  four 
thousand  copies  of  their  weekly  sheet  were  so  distri- 
buted. In  this  weekly  sheet  under  the  date  of  January 
31st,  1868,  they  published  that  the  plaintiffs  had  failed. 
This  was  confessedly  false.  The  plaintiffs  called  upon 
the  defendants  for  the  names  of  the  parties  furnishing 
the  information,  which  they  refused  to  give,  but  pub- 
lished the  next  week  a  retraction  of  the  report  com- 
plained of.  The  jury  had  returned  a  verdict  for  the 
plaintiffs  for  $400.  A  new  trial  was  denied  at  the 
General  Term  and  judgment  directed  on  the  verdict  in 
favor  of  the  plaintiffs.  It  was  then  appealed  to  the 
Court  of  Appeals.  The  only  question  presented  to  the 
court  by  the  appeal  was  :  whether  the  communication 
came  within  the  protection  of  privileged  communica- 
tions. Allen,  J.,  declared  that  the  case  might  be  de- 
cided upon  the  authority  of  Taylor  vs.  Church,  and  spoke 
of  the  unanimous  decision  of  the  court  in  that  case, 
seven  judges  taking  part  in  the  decision,  the  other  judge 
not  expressing  an  opinion  because  he  was  not  present  at 
the  argument.     He  says :     "  The  circumstances  under 

»  46  N.  Y.  188. 
34 


MERCANTILE    AGENCIES.  '  31 

which  this  judgment  was  given,  as  well  as  the  method 
adopted  by  the  judges  iu  d(!termining  this  precise  ques- 
tion by  a  forniul  declaration,  entitles  the  decision  to 
peculiar  weight  as  an  autliority.  That  case  cannot  be 
distinguished  from  this  in  any  circumstance  favorable  to 
the  defendant."  In  this  case  the  court  again  defines 
the  limits  of  the  doctrine  of  privileged  communications. 
Says  Allen,  J.,  "  A  communication  is  privileged  within 
the  rule  when  made  in  good  faith  in  answer  to  one  hav- 
ing an  interest  in  the  information,  and  it  will  be  pri- 
vileged if  volunteered  when  the  party  to  whom  the 
communication  is  made  has  an  interest  in  it,  and  the 
party  by  whom  it  is  made  stands  in  such  relation  to  him 
as  to  make  it  a  reasonable  duty,  or  at  least  proper  that 
he  should  give  the  information." 

In  regard  to  the  question  of  communications  in  cipher 
the  Court  say :  "  The  fact  that  the  libellous  statement 
was  in  cipher  is  not  material.  It  was  in  language  under- 
stood by  the  numerous  patrons  of  the  defendant,  and  all 
the  subscribers  to  the  publication  had  the  key  to  the 
cipher,  and  the  publication  was  equally  significant  and 
injurious  as  if  made  in  the  distinct  terms,  in  the  very 
words,  indicated  by  the  numerical  figures."  The  judg- 
ment was  affirmed. 

The  State  ex  rel.  Lanning  et  al.  vs.  Lonsdale^  came 
before  the  Supreme  Court  of  Wisconsin  in  1880.  This 
was  a  proceeding  against  the  appellant  Lonsdale,  as  for 
a  contempt,  to  enforce  a  civil  remedy.  Lonsdale  was 
the  managing  agent  of  the  mercantile  agency  of  II.  G. 
Dun  &  Co.  at  Milwaukee.  He  had  refused  to  answer 
certain  interrogatories  propounded  to  him  when  giving 
his  deposition  as  a  witness  before  a  court  commissioner 

'■  48  ^Yiscon.  3-18. 

35 


32  MERCANTILE   AGENCIES. 

of  Milwaukee  County,  in  an  action  pending  in  the  Circuit 
Court  of  Fond  du  Lac  County,  in  which  relators  were  plain- 
tift's,  and  one  Lewis  E.  Reed  defendant.  That  action  was 
an  action  to  recover  damages  for  an  alleged  libel  contained 
in  a  letter  which  it  was  charged  Heed  wrote  and  sent  to 
some  commercial  agency  in  Milwaukee,  giving  an  unfavor- 
able report  of  the  financial  standing  and  responsibility  of 
the  relators.  In  obedience  to  a  suhpcena  duces  tecum 
Lonsdale  appeared  before  the  commissioner.  Lonsdale, 
on  bein<'  uiterrogated,  refused  to  disclose  whether  the 
a^j-ency  had  received  any  such  communication  from  Reed, 
or  whether  Reed  was  one  of  the  correspondents  of  the 
ao-ency,  and  also  refused  when  requested  to  do  so  to 
produce  any  correspondence  or  documents  called  for  by 
the  subpoena.  The  ground  of  his  refusal  was  that  his 
answers  to  the  questions  propounded  would  have  a  ten- 
dency to  accuse  himself  of  libel,  which  is  a  misde- 
meanor, or  to  expose  him  to  a  penalty.  As  a  result  of 
his  continued  refusal,  Lonsdale  was  adjudged  guilty  of 
contempt  of  court,  and  ordered  to  pay  expenses  and 
costs  to  the  plaintiffs  in  the  libel  suit,  and  was  commit- 
ted to  jail.     From  this  order  Lonsdale  appealed. 

The  Court  had  to  dispose  of  a  number  of  questions 
presented  by  the  appeal.  On  the  question  of  privilege 
the  Court,  Lyon,  J.,  says :  "  We  do  not  think  it  proper 
to  pass  definitely  upon  the  character  of  the  communica- 
tion which  is  charged  to  be  libellous,  or  to  say  whether 
or  how  far  it  is  privileged  as  respects  Mr.  Reed.  These 
are  questions  which  should  regularly  be  determined  in 
the  libel  suit.  For  the  purposes  of  this  appeal  we  are 
inclined  to  think  that  it  was  conditionally  privileged  in 
the  hands  of  the  appellant  or  his  principals,  and  that 
they  might  lawfully  make  known  its  contents  confiden- 
tially to  their  subscribers,  seeking  information  of  the 
3G 


MERCANTILE    AGENCIES.  33 

financial  standing  of  tlio  relators,  provided  they  did  so 
in  good  faith — that  is,  without  malice,  and  in  the  helief 
that  the  statements  therein  contained  were  true.  There 
is  nothing  in  the  record  before  ns  tending  to  show  that 
the  appellant  has  made  known  the  contents  of  this  com- 
munication to  any  person  otlier  than  the  subscribers  of 
the  agency,  and  the  fidelity  with  which  he  has  guarded 
and  kept  the  secrets  of  the  agency  in  this  proceeding  is 
strong  evidence  that  he  has  not."  The  order  was  re- 
versed. 

Erber  &  Stickler  rs.  R.  G.  Dun  &  Co.^  was  tried  in 
April,  1882,  before  Judge  Caldwell  in  the  Circuit  Court 
of  the  United  States  for  the  Eastern  District  of  Arkansas. 
It  appeared  in  evidence  that  in  the  year  1880,  and  for 
some  years  prior  thereto,  Erber  &  Stickler  were  partners 
engaged  in  the  mercantile  business  at  Texarkana,  in  the 
State  of  Texas.  It  was  and  is  the  business  of  R.  G.  Dun 
&  Co.  to  impart  information  to  their  subscribers  orally 
on  application  therefor,  and  by  means  of  a  "  daily  noti- 
fication sheet"  printed  and  sent  to  their  subscribers  at 
the  agency  issuing  such  sheet.  In  the  fall  of  1880  re- 
ports injurious  to  the  credit  and  standing  of  the  plaintiffs 
were  in  circulation  in  Texarkana.  One  of  the  plaintiffs 
testified  that  these  reports  originated  with  one  Kozmin- 
sky,  another  mercliant  and  citizen  of  Texarkana.  In 
time  some  statement  of  these  reports  reached  the  mer- 
cantile agency  of  R.  G.  Dun  at  St.  Louis.  In  what 
terms  these  reports  reached  the  agency  at  St.  Louis  was 
not  very  clear.  Erber  &  Stickler  contended  that  the 
reports  made  by  Porter  or  some  one  else  at  Texarkana, 
and  given  out  by  the  agency  to  its  subscribers  calling 
for  the  same  were  to  this  effect,  viz :  "  Erber  &  Stickler 

>  4  McCrary,  160. 

87 


34  MERCANTILE   AGENCIES. 

are  selling  their  goods  below  cost.  They  are  about  to 
fail.  They  have  a  bad  business  record.  Their  creditors 
had  better  be  on  their  guard,  and  look  after  their  claims." 
On  the  13th  day  of  December,  1880,  the  agency  pub- 
lished the  "daily  notification  sheet,"  on  which  appeared 
the  names  Erber  &  Stickler  and  residence,  with  the 
words  "  call  at  office"  opposite  thereto.  This  sheet  was 
distributed  to  600  subscribers,  irrespective  of  their  in- 
terest in  the  question  of  the  plaintiffs'  credit  and  stand- 
ing. Dun  &  Co.  denied  tliat  the  words,  "  call  at  office," 
had  any  damaging  meaning.  Caldwell,  District  Judge, 
charging  the  jury,  said:  "It  is  indisputable  under  the 
evidence  that  whatever  was  said  orally  by  the  defendants 
about  the  plaintiffs  and  their  business  was  said  in  good 
faith  and  in  confidence  to  their  subscribers,  who  were, 
by  reason  of  their  business  relations  with  the  plaintiffs, 
interested  in  knowing  tlieir  financial  and  business  stand- 
ing, and  in  answer  to  requests  made  by  subscribers  in 
relation  thereto,  and  without  malice  in  fact.  .  .  .  These 
statements  thus  made  by  the  defendants  to  their  sub- 
scribers, in  answer  to  inquiries  in  relation  to  the  plain- 
tiffs, are  what  the  law  terms  'privileged  communica- 
tions.' "... 

As  to  the  publication  in  the  notification  sheets  the 
Court  says :  "  These  daily  notification  sheets  were  sent 
out  by  the  defendants  to  all  their  subscribers  in  the  city 
of  St.  Louis,  numbering  600,  irrespective  of  their  interest 
in  the  question  of  the  plaintiffs'  credit  and  standing. 
This  sheet  was  distributed  to  persons  having  no  interest 
in  being  informed  of  the  condition  of  plaintiffs'  firm. 
This  fact  robs  it  of  the  protection  of  a  privileged  com- 
munication, and  if  it  contains  libel  on  the  plaintiffs,  the 
defendants  cannot  escape  responsibility  for  such  libel  on 
the  plea  that  it  was  a  privileged  communication."  The 
38 


MERCANTILE    AGENCIES.  35 

Court  then  tells  the  jury  that  at  the  present  day  it  is  his 
duty  to  define  what  in  law  constitutes  a  libel,  and  that  it 
is  tlie  duty  of  the  jury  to  determine  whether  the  publi- 
cation falls  within  the  definition,  or  whether  it  is 
calculated  to  injure  the  reputation  of  the  plaintiffs. 
Accordingly,  he  defines  libel  and  says :  "  It  is  your  duty 
to  determine  whether  the  publication  of  the  '  daily  notifi- 
cation sheet'  containing  the  names  of  the  plaintiffs,  and 
opposite  thereto  the  words  '  call  at  office,'  is  a  libel  on  the 
plaintiflfs  within  this  definition."  He  then  discusses  the 
evidence  on  that  point.  The  Court  was  asked  to  instruct 
the  jury  that  "no  person  other  than  the  merchant  himself 
asking  for  information,  has  in  law  a  right  to  read,  hear, 
or  receive  said  words,  and  to  him  they  can  be  communi- 
cated only  by  the  defendants,  R.  G.  Dun  &  Co.,  personally ; 
and  the  reading  of  said  words  by  any  person  in  their  employ 
by  their  permission,  or  the  delivery  of  a  written  or  printed 
statement  containing  said  words  by  their  employes,  with 
their  permission,  to  the  clerks  of  a  merchant  subscriber 
requesting  information  concerning  the  plaintiffs,  or  to 
such  subscribers,  was  an  nnl awful  publication,  not  at  all 
within  or  protected  by  the  rule  of  law  as  to  privileged 
communications."  The  Court  discussed  the  instruction 
and  its  bearing  upon  the  questions  at  issue  at  some 
length.  "  The  merchants  and  other  business  men  of  the 
country,"  said  the  Court,  "  conducted  their  business  to  a 
very  large  extent  through  agents.  A  large  proportion,  if 
not  all  of  the  principal  commercial  houses  of  the  countrv, 
employ  commercial  travellers,  through  whom  sales  are 
effected,  credit  extended,  and  collections  made.  In 
many  of  the  houses  there  is  what  is  usually  termed  the 
credit  man  of  the  house,  whose  special  business  it  is  to 
inquire  in  reference  to  the  merit  of  all  persons  applyin<>- 
to  purchase  on  credit,  and  who    determines    to    whom 

39 


36  MERCANTILE    AGENCIES. 

credit  shall  be  given  and  the  amount.  The  credit  man 
of  tlie  house  may  or  may  not  be  a  principal.  It  fre- 
quently occurs  that  he  is  a  mere  clerk  or  agent.  Can  it 
be  sound  law  that  a  communication  made  to  a  principal 
m  a  house,  to  be  by  him  immediately  communicated  to 
an  agent  of  the  house  who  conducts  and  controls  the 
business  to  wliich  such  communication  relates,  is  privi- 
leged, and  that  the  same  communication  made  directly 
to  such  agent  is  not  privileged  ]  It  is  also  said  that 
while  such  information  is  privileged  if  imparted  by  some 
member  of  the  firm  of  li.  G.  Dun  &  Co.,  it  is  not  so  if 
imparted  by  a  clerk  or  agent  of  theirs.  If  the?  business 
of  the  defendant  is  lawful,  then  it  may  be  conducted  by 
the  same  agencies  that  are  lawful  in  the  conduct  of  any 
other  business." 

"  The  distinction  attempted  to  be  drawn  between  the 
right  to  resort  to  the  services  of  an  agent  in  this  business 
and  other  legitimate  business  pursuits,  is  not  well 
founded.  It  is  not  in  harmony  with  the  known  and  uni- 
versal methods  of  conducting  business.  Commercial  and 
other  business  pursuits  are  conducted  chiefly  by  partner- 
ships and  corporations,  and  the  former  often,  and  the 
latter  always,  can  act  only  by  agents ;  and  any  rule  of 
law  that  would  deny  to  them  the  right  to  avail  them- 
selves of  the  services  of  an  agent  in  every  department  of 
tlieir  business,  and  for  every  legitimate  purpose  connected 
with  it,  is  unsound.  What  a  man  may  lawfully  do  by 
himself  he  may  do  by  an  agent.  The  distinction  taken 
between  a  communication  to  a  principal  and  liis  agent  in 
the  case  of  Beardsley  vs.  Tappan,^  is  too  refined.  It  is 
not  supported  by  reason  or  authority." 

After  disposing  of  this  matter,  the  Court  declares  that 

'  o  Blatcliford,  -197. 
40 


MERCANTILE   AGENCIES.  37 

the  real  question  is  whether  such  communications  made 
by  a  commercial  agency  like  that  conducted  by  tlie 
defendants  are  privileged  in  any  case.  "  It  is  question- 
able," says  the  Court,  "  whether  it  is  not  pushing  the 
doctrine  of  privileged  communications  beyond  its  legiti- 
mate scope  to  hold  that  a  corporation  or  partnership 
whose  business  it  is  to  collect  information  in  regard  to 
the  standing  and  financial  condition  of  business  men 
which  is  imparted  to  subscribers  for  a  money  considera- 
tion, can  invoke  the  doctrine  of  privileged  communication 
for  its  protection 

"  The  only  case  on  the  point  decided  by  a  court  of 
last  resort  brought  to  our  attention,  is  Ormsby  vs.  Doug- 
lass.^ That  case  is  on  all  fours  with  the  case  at  bar, 
and  in  the  absence  of  opposing  authority  on  the  question, 
we  incline  to  assent  to  its  reasoning  and  to  follow  it." 
The  Court  then  quotes  from  the  opinion  of  Justice 
Woodruff,  and  says  that  "  it  is  wortliy  of  remark  that 
the  author  of  this  opinion  was  afterwards  United  States 
circuit  judge  for  the  second  circuit,  and  Justice  Hunt 
of  the  Supreme  Court  of  the  United  States  was  also  a 
member  of  the  Court  of  Appeals  at  the  time  the  case 
was  decided  and  seems  to  have  concurred  in  the  opin- 
ion." 

Trussell  vs.  Scarlett,-  trading  as  R.  G.  Dun  &Co.,  was 
tried  in  December,  1882,  before  Morris,  district  judge, 
and  a  jury  in  the  Circuit  Court  of  the  United  States  for 
the  district  of  Maryland.  Trussell  was  a  general  mer- 
chant in  business  in  Charlestown,  West  Virginia.  In 
July,  1881,  in  Baltimore,  Scarlett  sent  to  William  D,>v- 
ries  a  paper  containing  the  following  words:  "Trussell, 
C.  W.,  Charlestown,  Jefferson  County,  W.  Va.,  D.  G., 

^  37  New  York,  477.  -  18  Feb.  Rep.  214. 

41 


38  MERCANTILE    AGENCIES. 

etc.,  July  11,  1881,  has  made  an  assignment  for  the 
benefit  of  his  creditors.  No  particulars  known  as  yet." 
Tlie  plaintiff  wished  to  present  the  communication  in 
evidence.  Objection  was  made  on  the  ground  tliat  it 
was  a  privileged  communication.  Evidence  was  then 
had  as  to  its  privileged  character.  Devries  testified  that 
the  firm  of  William  Devries  &  Co.,  of  which  he  was  a 
partner,  was  a  subscriber  to  the  mercantile  agency  of 
R.  G.  Dun  &  Co. ;  that  when  they  first  credited  Trussell 
they  made  an  inquiry  of  11.  G.  Dun  &  Co.;  that  they 
were  apt  to  make  one  twice  a  year — every  six  months — 
may  have  made  half  a  dozen  during  the  year;  that  this 
paper,  or  a  similar  one,  came  to  their  office  giving  this 
information.  Witness,  upon  being  shown  a  ticket  ad- 
dressed to  II.  G.  Dun  &  Co.,  asking  information  in  regard 
to  plaintiff  and  dated  June  16,  1881,  identified  it  as  hav- 
ing come  from  his  office,  and  upon  being  asked  whether 
the  paper  received  by  him  was  not  in  answer  to  the  in- 
quiry contained  in  said  ticket,  replied:  "  I  don't  know. 
I  should  infer  it  was.  We  make  inquiries  every  day  in 
the  week.  We  have  an  understanding  with  R.  G.  Dun 
&  Co.  that  if  anything  occurs  to  any  of  our  customers 
they  are  to  immediately  inform  us."  The  communica- 
tion was  held  to  be  a  privileged  communication  and  the 
evidence  was  excluded. 

The  Cincinnati  "  Commercial  Gazette"  not  long  ago 
published  the  charge  of  Judge  Harmon  in  a  libel  suit 
against  a  mercantile  agency  which  was  tried  in  the 
Superior  Court  of  Cincinnati  and  decided  Februuvy 
24th,  1886.  The  trial  was  quite  lengthy,  occupying 
two  weeks.  The  jury  returned  a  verdict  for  the  defen- 
dant. The  charge  is  an  admirable  statement  of  the  law 
governing  the  question.  The  "Gazette"  says:  "Thirty- 
five  years  ago  no  judge  would  have  given  such  a  charge, 
42 


MERCANTILE    AGENCIES.  39 

and  no  jury  would  have  given  siu-h  a  verdict.  The 
efforts  to  secure  trade  by  sending  out  travellers,  who  fre- 
quently solicit  patronage  without  re^gard  to  the  fitness 
of  the  subject  for  credit,  have  made  mercantile  agencies 
a  necessity,  and  tlie  charge  of  the  judge  and  the  verdict 
of  the  jury  are  in  keeping  with  the  advanced  ideas  of 
the  business  community,  which  demands  telegraphs, 
telephones,  lightning  express  trains — in  fact  everything 
that  will  enable  them  to  transact  business  securely  and 
rapidly." 

We  have  now  presented  all  the  cases  which,  so  far  as 
we  have  been  able  to  discover,  relate  to  the  question  of 
commnnications  on  the  part  of  mercantile  agencies. 
There  has  certainly  been  a  development  in  the  views 
of  the  courts.  At  first  they  seemed  inclined  to  restrict 
the  protection  given  to  privileged  communications  to 
such  as  passed  between  principal  and  principal.  Gradu- 
ally they  recognized  the  fact  that  through  the  needs  of 
trade  and  commerce,  and  the  rapid  growth  of  the  busi- 
ness of  the  mercantile  agencies,  new  conditions  had 
arisen  which  demanded  recognition.  The  agencies  were 
allowed  the  means  of  carrying  on  their  work.  They 
were  permitted  to  have  clerks  and  agents.  Communi- 
cations made  by  principals  or  agents  of  mercantile  agen- 
cies to  the  merchant  or  his  agents  are  now  held  to  be 
privileged.  The  same  principle  would  also  protect  the 
correspondent  who  has  furnished  information  to  a  mer- 
cantile agency.  Nor  would  it  make  any  diffennice 
whether  the  communication  which  was  privileged  was 
made  orally,  in  writing,  or  in  print.  The  printer  wonld 
be  regarded  as  a  necessary  agent.  In  this  respect  there 
has  been  an  advance  since  the  dictum  of  the  judge  in 
Taylor  vs.  Church. 


43 


40  MERCANTILE   AGENCIES. 

In  Lawless  vs,  Anglo-Egyptian  Cotton  &  Oil  Co.,^ 
Mellor,  J.,  says :  "  I  think  that  we  should  be  going 
against  the  progress  of  the  age  if  we  were  to  hold  that 
the  necessary  publication  of  the  manuscript  to  the 
printer,  from  the  fact  that  the  directors,  in  making  this 
communication  to  the  great  body  of  the  shareholders, 
adopted  printing  instead  of  employing  confidential 
clerks  to  write  a  letter  to  each  shareholder,  rendered  the 
communication  unprivileged." 

The  early  tendency  of  mercantile  agencies  seems  to 
have  been  to  claim  privilege  for  all  communications  to 
its  subscribers  irrespective  of  whether  they  were  in- 
terested in  the  communication  or  not.  The  courts  have 
held  that  communications  made  by  mercantile  agencies 
are  privileged  wlien  made  to  subscribers  who  are  inter- 
ested in  those  particular  communications.  The  fact  that 
a  merchant  is  a  subscriber  and  is  connected  with  the 
mercantile  world,  does  not  give  the  agency  the  right  to 
communicate  to  him  matters  in  which  he  has  no  present 
interest.  This  position  the  courts  have  steadfastly  main- 
tained. We  therefore  see  no  reason  for  saying  with 
Judge  Cooley,  "  that  reports  of  a  mercantile  agency 
to  its  customers  are  not  privileged ; "  nor  can  we  hold 
with  Doctor  AVharton,  who  seems  to  draw  the  line  of 
distinction  between  communications  which  mercantile 
agencies  publish  to  the  world  and  such  as  they  publish 
to  their  subscribers,  holding  that  the  latter  are  privi- 
leged. 

We  do  not  know  of  any  case  which  has  been  brought 
into  the  courts  in  which  mercantile  agencies  have  volun- 
teered information  to  parties  who  were  not  subscribers, 
but  such  a  case  might  easily  arise.      We  believe  that 

»  L.  R..  4  Q.  B.  2G2. 
44 


MERCANTILE   AGENCIES.  41 

such  communications  would  also  be  privileged.  Odgers, 
in  his  "  Treatise  on  the  Law  of  Libel  and  Slander,"^ 
says :  "  Where  neither  the  defendant  himself  nor  any 
one  with  whom  he  has  confidential  relations,  is  inter- 
ested in  the  subject-matter  of  the  communication,  it  is 
very  difficult  to  define  what  circumstances  will  be  suffi- 
cient to  impose  on  him  the  duty  of  volunteering  informa- 
tion to  the  prejudice  of  the  plaintiff.  There  is  no  rule 
of  law  on  the  point.  It  is  a  question  rather  of  moral  or 
social  ethics.  .  .  .  The  jury  must  place  themselves  in 
the  position  of  the  defendant  at  the  time  these  suspicious 
circumstances  were  brought  to  his  knowledge,  when  first 
the  question  arose  in  his  mind:  'Ought  I  not  to  inform 
A.  of  tliese  matters  which  nearly  concern  him  V  It  may 
be  that  another  man  would  have  said :  '  It  is  no  concern 
of  mine,'  and  would  do  nothing  (which  is  always  the 
safer  course).  But  if  the  defendant  honestly  felt  that 
he  could  not  conscientiously  allow  A.  to  continue  in 
secure  ignorance,  that  he  must  communicate  to  him  the 
rumor  he  had  heard,  and  if  he  had  reasonable  grounds 
for  so  feeling,  that  is  sufficient.  It  is  not  necessary  that 
the  reports  which  reach  the  defendant  should  be  true,  or 
that  he  should  thoroughly  investigate  them.  Hearsay  is 
sufficient,  reasonable,  and  probable  cause  in  the  absence 
of  malice ;  unless  the  defendant  ought,  for  any  reason, 
to  have  known  that  his  informant  was  unreliable  and  his 
story  undeserving  of  belief.  .  .  ."  The  law  on  this  point 
cannot  be  better  expressed  than  in  the  following  passage 
found  in  the  opinion  of  the  Court,  per  Blackburn  in 
Davies  vs.  Snead :  -  "  AVhere  a  ])erson  is  so  situated  that 
it  becomes  right,  in  the  interests  of  society,  that  he 
should  tell  to  a  third  person  certain  facts,  then  if  he 

^  Pp.  212  and  213.  ^  L.  R.,  5  Q.  B.  611. 

4  45 


42  MERCANTILE    AGENCIES. 

honafide  and  witlioiit  malice  docs  tell  them,  it  is  a  privi- 
leged commuincation.  The  only  difficulty  is  in  any 
given  case  to  determine  whether  it  had  or  had  not 
become  right  in  tlie  interests  of  society  that  the  de- 
fendant should  act  as  he  did." 

It  has  sometimes  happened  that  subscribers,  to  whom 
information  has  been  communicated,  have  informed  par- 
ties concerning  whom  statements  were  made  of  the  nature 
of  the  statements,  and  an  action  against  the  agency  has 
been  the  result.  In  such  a  case  it  has  been  held  that  the 
agency  may  have  a  bill  of  particulars  which  shall  specify 
to  whom  the  statements  complained  of  had  been  commu- 
nicated. In  this  way  the  agency  can  discover  the  names 
of  subscribers  who  have  furnished  the  information  upon 
which  the  suit  is  brought. 


THE  EFFECT  OF  EEPEESENTATIONS  MADE  TO 
MERCANTILE  AGENCIES. 

It  is  the  custom  of  mercantile  agencies  to  send  agents 
to  call  upon  persons  engaged  in  business  and  obtain  from 
them  a  statement  of  their  financial  condition.  Some- 
times this  is  done  because  some  subscriber  is  seeking 
information  in  regard  to  the  party ;  sometimes  because 
the  agency  wishes  to  be  prepared  in  case  of  inquiries. 
The  person  does  not  know  who  it  is  that  desires  the 
statement,  but  he  is  well  aware  of  the  fact  that  some 
one  is  or  may  be  interested  in  knowing  about  him,  and 
that  any  representation  he  may  make  as  to  his  finan- 
cial condition  will,  in  all  probability,  be  relied  upon 
by  some  one.  The  question  which  we  now  propose  to 
investigate  is,  whether  one  who  makes  false  representa- 
tions to  a  mercantile  agency  is  liable  to  a  person  to 
46 


MERCANTILE    AGENCIES.  43 

whom  tlic  representations  are  communicated,  and  wlio, 
relying  upon  tiic  same,  suffers  damage. 

Tliere  are  some  interesting  cases  in  which  may  be 
found  the  principles  that  can  be  applied  here.  The 
law  holds  him  responsible  who  does  any  wrongful  act 
which  causes  injury  to  another.  The  injury  may  be 
inflicted  directly  by  one  upon  another  Avhom  he  selects, 
or  it  may  be  set  in  motion  by  one  and  act  upon  a  par- 
ticular person  not  directly  contemplated  by  the  one  doing 
the  injurious  act.  The  law  holds  that  a  man  must  be  held 
to  intend  the  consequences  of  his  acts.  This  principle 
lies  at  the  basis  of  the  decision  in  the  well-known  cases 
of  Thomas  vs.  Winchester,^  and  Scott  vs.  Shepherd.^ 

The  legal  maxim  that  "  fraud  is  not  purged  by  cir- 
cuity" is  also  helpful  to  us  in  reaching  and  understanding 
the  principles  involved  in  this  question. 

In  Eaton  vs.  Avery,^  which  is  the  leading  case  upon 
this  subject,  Rapallo,  J.,  said :  "  The  counsel  for  the 
defendant  contends  that  the  plaintiff  cannot  maintain  an 
action  against  the  defendant  for  false  representations 
made  by  him  to  Dun,  Barlow  &  Co.,  or  its  agent,  and 
that  such  representations,  assuming  them  to  have  been 
made,  are  not  sufficiently  connected  with  the  dealing 
between  the  defendant  and  the  plaintiff  to  enable  the 
latter  to  recover  by  reason  thereof.  On  this  point  we 
are  of  opinion  that  the  law  was  correctly  stated  by  the 
learned  Judge  before  whom  the  trial  was  had,  in  his 
charge  to  the  jury,  wherein  he  instructed  them  that,  if 
the  defendant,  when  he  was  called  upon  by  the  agent  of 
Dun,  Barlow  &  Co.,  made  the  statements  alleged  in  the 
complaint  as  to  the  capital  of  the  firm  of  Avery  &  Rig- 

»  6  N.  Y.  397.  »  1  Smith's  Lead.  Cas.  210. 

"  83  N.  Y.  3L 

47 


44  MERCANTILE    ANENCIES. 

grins,  and  they  were  false,  and  so  known  to  be  by  the 
defendant,  and  were  made  with  the  intent  that  they 
should  be  communicated  to  and  believed  by  persons  in- 
terested in  ascertaining  the  pecuniary  responsibility  of 
the  firm,  and  with  intent  to  procure  credit  and  defraud 
such  persons  thereby,  and  such  statements  were  commu- 
nicated to  the  plaintiff  and  relied  upon  by  him,  and  the 
alleged  sale  was  procured  thereby,  the  plaintiff  was  en- 
titled to  recover.  The  rule  thus  laid  down  accords  with 
the  principle  of  adjudications  in  analogous  cases,  in 
which  it  has  been  held  that  it  is  not  essential  that  a  rep- 
resentation should  be  addressed  directly  to  the  party  who 
seeks  a  remedy  for  having  been  deceived  and  defrauded 
by  means  thereof." 

Tlie  Court  then  refers  to  a  number  of  authorities,  and 
remarks  that  "  the  principle  of  these  cases  is  peculiarly 
applicable  to  the  case  of  statements  made  to  mercantile 
agencies." 

Let  us  examine  some  of  these  cases,  and  see  upon  what 
principles  the  court  bases  its  opinion. 

In  Morgan  vs.  Skiddy  et  al}  the  defendants  were  held 
liable  for  publishing  false  and  deceptive  pamphlets  and 
prospectuses,  which  they  caused  to  be  exhibited  to  the 
plaintiff",  knowing  them  to  be  false,  whereby  the  plaintiff, 
relying  thereon,  was  induced  to  purchase  some  of  the  stock 
of  the  defendants'  company.  In  this  case  the  pamphlets 
and  prospectuses  were  exhibited  to  the  plaintiff,  not  by 
the  defendants  themselves,  but  by  one  Dalton,  a  trustee 
of  the  defendants'  company. 

In  Newbury  vs.  Garland-  it  appeared  that  the  defend- 
ant was  connected  with  some  company,  and  advertised 
falsely  in  regard  to  the  resources  and  prospects  of  the 

»  G2  N.  Y.  319.  '  31  Barb.  121. 

48 


MERCANTILE   AGENCIES.  45 


company.  By  means  of  those  representations,  and 
through  the  agency  of  one  Hamilton,  he  induced  the 
phiintiff  to  take  shares  of  stock  in  exchange  for  certain 
real  estate  belonging  to  the  plaintiff.  The  shares  turned 
out  to  be  worthless.  The  Court,  Endicott,  J.,  said: 
"  The  doctrine  of  these  cases,  and  of  some  others  in  the 
English  courts  to  which  I  shall  presently  advert,  is  that 
a  statement  made  to  the  public,  and  designed  to  influ- 
ence the  public,  is  designed  to  influence  every  individual 
who  is  interested  in  its  subject-matter.  If  any  person 
is  induced  to  part  with  his  property,  or  purchase  that  to 
which  the  statement  refers,  by  what  it  contains,  and  which 
would  naturally  have  that  influence,  the  parties  who  have 
put  it  forth  arc  responsible  if  it  be  false  and  fraudulent. 
.  .  .  Wherever  there  is  deceit,  designed  to  injure,  and 
consequent  damage,  the  common  law  will  give  an  action. 

In  Commonwealth  vs.  CaW  the  Court  said:  "A  false 
representation,  made  to  the  agent  of  Parker,  and  com- 
municated by  him  to  Parker,  upon  which  he  acted,  was, 
in  legal  contemplation,  a  false  representation  to  Parker 
himself.  It  was  designed  to  influence  him,  and  whether 
communicated  to  him  directly,  or  through  the  interven- 
tion of  an  agent,  can  make  no  difference.  It  vvas  in- 
tended to  reach  and  operate  upon  his  mind.  It  did  reach 
and  produced  the  desired  effect  upon  it,  viz :  the  pay- 
ment of  the  money.  And  it  is  immaterial  whether  it 
passed  through  a  direct  or  circuitous  channel." 

In  Commonwealth  vs.  Harley^  representations  were 
made  to  a  clerk  in  the  shop  of  the  firm  of  G.  B.  Blake  & 
Co.,  and  were  conveyed  to  a  member  of  the  firm.  Partly 
upon  these  representations,  and  partly  upon  information 
obtained  from  other  persons,  the  goods  were  sold  to  the 

*  21  Pick.  515.  *  7  Mete.  4G2. 

49 


46  MERCANTILE    AGENCIES. 

defendant.  The  Court  instructed  the  jury  on  this  point, 
that  ''  it"  these  facts  were  proved,  it  was  sufficient  to  sus- 
tain the  allegation  in  tlie  indictment,  that  the  said  G.  B. 
Blake  &  Co.  were  induced  by  said  false  pretences  to  de- 
liver the  said  goods  to  the  defendant." 

In  view  of  such  authorities  we  think  that  the  Court 
was  riglit  in  concluding  that  "  the  case  is  a  new  one  in 
its  facts,  but  the  principles  by  which  it  should  be  governed 
are  well  established." 

In  that  case,  the  Eaton,  Cole  &  Burnham  Co.  brought 
suit  against  one  Avery  for  loss  suffered  by  them  through 
^xlse  representations  as  to  his  financial  condition  made  to 
a  mercantile  agency.  According  to  the  plaintiff's  evi- 
dence, it  appeared  that  in  August,  1875,  a  person  em- 
ployed by  tlic  mercantile  agency  of  Dun,  Barlow  &  Co. 
applied  to  Avery  for  a  statement  of  the  means  of  the 
firm  to  be  reported  to  the  agency,  informing  him  of 
the  object  of  his  visit ;  that  Avery  stated  the  capital  of 
the  firm  to  be  $20,()()(),  chiefly  contributed  by  him,  in 
money,  and  gave  further  particulars.  The  employe  re- 
duced the  statement  to  writing  and  afterward  transcribed 
it  on  the  books  of  the  agency.  Avery  subsequently  ap- 
plied to  Eaton,  president  of  the  above  company,  to  sell 
his  firm  goods  on  credit.  Eaton,  before  making  the 
sale,  sent  to  the  office  of  the  agency  for  information  as 
to  the  responsibility  of  the  firm  and  received  an  answer 
in  writing,  which  gave  the  substance  of  Avery's  state- 
ments These  Eaton  examined  and  he  relied  entirely 
on  the  report  in  making  the  sale.  After  the  failure  of 
Avery  to  pay,  Eaton  exhibited  to  him  the  statement,  and 
he  admitted  the  making  of  the  representations  therein. 
Iliggins,  Avery's  partner,  testified  that  Avery  did  not 
contribute  any  capital  either  in  money  or  property  ;  he 
(Kiggins)  had  contributed  tools  valued  at  Ij^-lOOO,  of 
60 


MERCANTILE   AGENCIES.  47 

wliicli  Avery  agreed  to  ])ay  half,  but  did  not.  Avery, 
about  the  time  he  made  the  statement,  advised  him  tliat 
he  was  going  to  the  agency  to  put  this  property  in  the 
name  and  to  the  credit  of  the  firm,  and  afterwards  stated 
to  him  that  he  had  rated  the  firm  at  $25,000.  Judg- 
ment had  been  entered  on  a  verdict.  At  the  General 
Term  it  was  affirmed  and  was  then  appealed  to  the 
Court  of  Appeals.  It  was  affirmed  in  that  court  in  No- 
vember, 1880.  "  Proof  was  given  at  the  trial,"  said  the 
Court,  "  as  to  the  business  and  office  of  these  agencies, 
but  they  are  so  well-known  and  have  been  so  often  the 
subject  of  discussion  in  adjudicated  cases  that  the  courts 
can  take  judicial  notice  of  them. /A  person  furnishing 
information  to  such  an  agency  in  relation  to  his  own 
circumstances,  means,  and  pecuniary  responsibility  can 
have  no  other  motive  in  so  doing  than  to  enable  the 
agency  to  communicate  such  information  to  persons  who 
may  be  interested  in  obtaining  it  for  their  guidance  in 
giving  credit  to  the  party  ;  and  if  a  merchant  furnishes 
to  such  an  agency  a  wilfully  false  statement  of  his 
circumstances  or  pecuniary  ability,  with  intent  to  obtain 
a  standing  and  credit  to  whicli  he  knows  that  he  is  not 
justly  entitled,  and  thus  to  defraud  whoever  may  resort 
to  the  agency,  and  in  reliance  upon  the  false  information 
there  lodged,  extend  a  credit  to  him,  there  is  no  reason 
why  his  liability  to  any  party  defrauded  by  those  means 
should  not  be  the  same  as  if  he  had  made  the  false 
representation  directly  to  the  party  injured."  / 

The  question  was  raised  in  this  case  as  to  >Aen  a  per- 
son is  responsible  for  false  representations  made  to  one 
party  which  are  relied  upon  and  acted  upon  by  a  third 
party.  The  Court  held  that  "if  A.  casually  or  from 
vanity  makes  a  false  or  exaggerated  statement  of  liis 
pecuniary  means  to  B.,  or  even  if  he  does  so  with  intent 

51 


48  MERCANTILE    AGENCIES. 

to  deceive  and  defraud  B.,  and  B.  communicates  the  state- 
ment to  C,  wlio  acts  upon  it,  A.  cannot  be  held  as  for  a 
false  representation  to  C.  But  if  A.  makes  the  state- 
ment to  B.  for  the  purpose  of  being  communicated  to  C, 
or  intendin<^  that  it  shall  reach  and  influence  him,  he 
can  be  so  held." 

The  same  rules  apply  here  as  in  the  case  of  representa- 
tions made  to  parties  directly.  In  order  to  render  the 
fraud  actionable  it  must  appear  that  the  representations 
were  made  as  alleged,  that  they  were  made  in  order  to 
influence  the  plaintiff's  conduct,  that  the  plaintiff  relied 
upon  them  and  acted  upon  them,  that  the  representations 
were  untrue,  that  the  plaintiff  suffered  damage  on  ac- 
count of  the  action  he  was  induced  to  take,  and  that  this 
damage  followed  proximately  the  deception. 

In  regard  to  the  purpose  of  the  defendant  the  Court 
said  :  "  By  making  a  statement  of  the  financial  condi- 
tion of  his  firm  to  such  an  agency  he  virtually  instructed 
it  what  to  say  if  inquired  of.  Can  it  make  any  dift'er- 
ence  whether  he  spontaneously  went  to  the  agency  to 
furnish  the  information,  or  whether  he  gave  it  on  their 
application  1  He  must  have  known  that  the  object  of 
the  inquiry  was  not  to  satisfy  mere  curiosity,  but  to  ena- 
ble the  agency  to  give  information  upon  which  persons 
applying  for  it  might  act,  in  dealing  with  the  defendant's 
firm."       ^ 

In  this  case  it  appeared  that  the  agency,  in  reporting 
the  statements  of  Avery  to  Eaton,  added  to  its  account 
of  what  Avery  had  said,  the  following :  "  We  do  not 
confirm  his  possession  of  so  much  means  as  he  claims, 
though  he  has  had  opportunities  to  earn  it.  Claims  to 
have  contract  for  $25,000  worth  of  work  at  profitable 
rates.  Their  claims  for  credit  are  not  yet  established, 
and,  for  the  present,  small  amounts  should  rule,  though  so 
52 


MERCANTILE   AGENCIES.  49 

far  have  paid  as  agreed."  This  was  followed  hy  the 
usual  statement  that  the  information  was  communicated 
in  the  strictest  confidence,  etc.  The  report  concluded 
with  these  words  :  "  Tiie  actual  verity  of  this  or  any 
other  information  obtained  through  -the  mercantile 
agency  is  in  no  manner  guaranteed  by  the  said  agency 
or  the  proprietors  thereof,  for,  notwithstanding  every 
effort,  mistakes  and  misapprehension  may  occasionally 
occur."  The  Court  held  that  these  cautions  "  related 
rather  to  the  responsibility  of  Dun,  Barlow  &  Co.,  for 
the  accuracy  of  the  information  which  they  communi- 
cated, than  to  that  of  the  defendant  for  the  truthfulness 
of  that  which  he  lodged  with  them  for  the  purposes  of 
their  agency  ;"  but  thought  that  the  defendant  was  en- 
titled to  have  the  jury  instructed  that  they  might  take 
into  consideration  whether  the  report  made  in  the  above 
form  was  such  a  statement  as  a  prudent  man  would 
rely  on. 

A  very  interesting  case  on  this  subject,  and  one  which 
deserves  careful  study,  is  the  case  of  Macullar  et  al.  vs. 
McKinley.^  It  was  tried  in  the  Superior  Court  of  the 
city  of  New  York.  McKinley  was  a  merchant  tailor  in 
the  city  of  New  York.  The  plaintiffs  were  merchants 
in  Boston.  On  or  about  February  2oth,  1881,  an  em- 
ploye of  the  Bradstreet  Company  called  on  McKinley 
and  told  him  that  he  came  for  the  purpose  of  getting  a 
statement  of  his  financial  condition.  McKinley  said, 
"  Have  a  stock  on  hand  of  $2500,  and  no  liabilities,  as 
I  pay  cash  for  all  my  purchases."  In  May,  1881, 
Macullar,  Parker  &  Co.  began  to  sell  goods  to  the 
defendant,  through  their  travelling  agent.  Before  ex- 
tending  credit  to  McKudey  they  made  inquiries  as  to 

*  49  N.  Y.  (Superior  Court)  5. 

53 


50  MERCANTILE   AGENCIES. 

his  financial  standing  of  the  Bradstreet  Company,  to 
which  they  were  subscribers.  Tlie  agency's  report  to 
MacuUar,  Parker  &  Co.  contained  McKinley's  state- 
ment of  February,  1881.  The  defendant  purcliased 
several  bills  of  goods  in  May  and  June  from  the  plain- 
tiff, for  which  he  paid.  In  June,  1881,  anotlier  em[)loye 
of  the  Bradstreets  called  upon  McKinley,  and  as  a  re- 
sult of  the  interview  he  made  a  report  to  the  agency,  in 
which,  referring  to  McKinley,  he  said:  "He  declines 
giving  any  information ;  he  is  believed  to  be  working 
with  his  wife's  money ;  is  stated  to  have  failed  two  or 
three  times ;  regarded  as  of  little  responsibility,  and 
jobbing  houses  in  the  city  say  they  would  sell  him  only 
for  cash."  The  report  was  spread  upon  the  books  of 
the  Bradstreet  Company  June  20th,  1881.  It  was  put 
on  file  and  distributed  to  those  who  inquired.  It  was 
not  brought  to  the  knowledge  of  the  plaintiffs.  Mc- 
Kinley bought  goods  in  August,  September,  and  October. 
In  November  he  made  a  general  assignment,  preferring 
certain  members  of  his  own  family,  among  others  his 
wife,  to  whom  he  recited  an  indebtedness  of  nearly 
$1800,  all  borrowed  before  September,  1880,  and  $350 
borrowed  from  other  persons  before  February,  1881. 
His  inventory  showed  an  indebtedness  of  $-1097.63,  with 
assets  of  the  nominal  value  of  $2526.80,  and  actual 
value  of  $1553.80.  An  action  was  brought  for  damages 
for  false  representations  made  by  the  defendant  in  pur- 
chasing goods  upon  credit  from  the  i)laintiffs.  The 
sales  and  credits  on  account  of  which  this  action  was 
brought  were  those  made  in  August,  September,  and 
October.  The  action  was  brtDught  upon  the  representa- 
tions made  in  February,  1881.  The  Court  dismissed  the 
complaint  on  the  ground  "  that  Bradstreet  &  Com])any 
were  for  the  pur[)Oses  of   the  trial  the  plaintiffs'  agents. 


MERCANTILE   AGENCIES.  51 

The  information  whicli  they  communicated  to  the  plain- 
tiffs required  the  plaintiffs  subsequently  to  ascertain 
wlicther  they  had  received  further  information  wliich 
qualified  the  former  representations.  The  latter  infor- 
mation, spread  upon  the  books  of  Bradstreet  &  Company 
on  June  20th,  before  any  of  these  bills  were  contracted, 
was  that  the  defendant  was  doing  business  with  his 
wife's  money  and  was  of  little  or  no  responsibility.  The 
plaintiffs  were  bound  to  ascertain  whether  there  had 
been  any  change  in  the  report  to  the  agency  or  other- 
wise. In  law  the  plaintiffs  are  chargeable  with  the 
knowledge  of  that  further  report  made  to  their  agents." 

The  case  was  appealed  to  the  General  Term  of  the 
Superior  Court,  and  was  argued  before  the  three  judges 
in  December,  1882.  Sedgwick,  J.,  delivered  the  opinion 
of  the  Court  affirming  the  judgment,  and  Freedman,  J., 
concurred.  Russell,  J.,  dissented.  The  question  raised 
in  this  suit  is  one  of  great  importance.  We  have  shown 
how  Woodruff,  J.,  in  Ormsby  vs.  Doughxss,  justified  the 
principles  supporting  the  view  that  the  mercantile  agency 
was  the  agent  of  the  subscriber.  In  this  case  we  find  the 
extent  of  the  agency  considered.  In  view  of  the  impor- 
tance of  the  subject  we  have  deemed  it  best  to  present  at 
some  length  the  points  touched  upon  by  the  Court. 
Sedgwick,  J.,  refers  to  the  opinion  of  the  Court  in  the 
case  of  Eaton  vs.  Avery,  and  then  says : — 

"  I  wish  here  specifically  to  notice  that  in  this  decla- 
ration of  what  the  law  is,  it  is  implied  that  the  evidence 
must  show  that  the  defendant  was  the  responsible  cause 
of  the  plaintiffs  relying  on  the  statement.  Of  course 
this  would  be  shown,  in  most  cases,  by  the  mere  fact  of 
the  making  of  the  reprcsentations  when  the  defendant 
was  proceeding  to  buy  the  goods.  There  might,  liow- 
ever,  be  cases  in  which  the  representations  were  made 


52  MERCANTILE    AGENCIES. 

to  induce  one  sale  only,  and  yet  the  seller  would  be 
induced  by  the  statements  to  make  another  sale  at  a 
future  time,  wlien  the  buyer  would  not  be  responsible 
for  the  operation  of  tlie  seller's  mind." 

A'^ain  :  "  The  plaintiffs  were  subscribers  to  the  agency. 
It  was  not  shown  how  often,  as  a  habit,  the  agency 
applied  to  business  men  for  information  as  to  their 
means.  As  a  fact  in  this  case,  th(»  agency  applied  to 
the  defendant  for  a  statement  of  his  financial  condition 
in  February,  1881,  and  again  in  June,  1881.  Both  state- 
ments were  spread  upon  the  books  of  the  agency.  What 
was  done  in  this  case  it  may  be  assumed  was  done  in 
general  as  to  all  business  men.  Indeed,  tlie  methods  of 
business  men  require  that  applications  be  made  from 
season  to  season  repeatedly.  The  profit  or  loss  of  each 
business  season  must  cause  a  change  of  the  financial  con- 
dition at  the  beginning  of  the  season,  or  the  fiict,  that 
nothing  has  been  made  or  nothing  lost  is  an  important 
piece  of  information.  A  just  conclusion  in  my  judg- 
ment is,  that  when  the  plaintiffs  received  the  statement 
of  February,  they  could  not  be  justified  in  assuming  that 
it  was  made  by  the  defendant  as  something  which  he 
meant  they  should  sell  goods  upon  for  all  future  time, 
but  only  for  that  space  of  time  which,  according  to  the 
custom  of  the  agency,  would  elapse  before  another  appli- 
cation be  made  and  another  statement  procured.  The 
defendant  could  assume  that  after  the  application  in 
June  the  plaintiffs  would  act  ui)on  the  custom  of  the 
agency,  and  giving  no  further  operation  to  the  first  state- 
ment than  it  should  properly  have,  would  not  act  upon 
it,  except  in  connc^ction  with  the  June  statement.  The 
defendant  would  be  bound  to  know  that  the  statement 
he  made  in  February  would  be  communicated  to  the 
plaintiffs,  and  would  also  have  the  riglit  to  believe  that 
56 


MERCANTILE    AGENCIES.  63 

they  would  learn  of  the  statement  in  June.  It  was 
observed,  in  the  course  of  the  argument  at  the  Bar,  that 
the  agency  did  not  furnish  the  information  it  received  to 
its  subscribers  always  and  uniformly,  but  gave  it  only  to 
such  of  them  as  inquired  for  information.  Nevertheless, 
it  is  true  that  the  defendant  would  be  liable  for  the  Feb- 
ruary statement,  on  the  ground  that  when  he  proposed 
to  buy  goods  he  would  have  convincing  reason  to 
believe  that  the  plaintiffs,  if  subscribers  to  the  agency, 
would  apply  to  it.  He  must  have  the  benefit  of  the 
consideration  that  his  mind  would  work  in  a  like  manner 
upon  proposing  to  buy  goods  after  the  second  statement." 

Again:  "  I  therefore  am  of  the  opinion  that  it  appeared, 
by  undisputed  testimony,  that  the  plaintiffs  were  not  in- 
duced by  the  defendant  to  rely  upon  the  statement  of 
February  by  itself,  but  upon  it  in  connection  with  such 
further  statement  as  in  the  usual  course  of  the  business 
would  be  made  before  August.  The  plaintiffs  wouM 
learn,  from  the  two  coupled  together,  that  the  defendant 
refused  to  reassert  the  facts  stated  by  him  in  February, 
and  therefore  did  not  claim  any  credit  upon  an  implied 
assertion  by  him  that  his  first  statement  still  held  good. 
The  defendant  had  reason  to  believe  that  the  plaintiffs 
had  learned  of  the  second  statement,  and  were  not  about 
to  rely  upon  the  first  statement.  On  either  proposition 
the  defendant  was  not  liable,  and  the  court  made  a 
correct  disposition  of  the  case." 

llussell,  J.,  acknowledges  the  general  rule  to  be  "that 
a  principal  is  chargeable  in  law  with  information  com- 
municated to  his  general  agent,  or  to  his  special  agent 
in  the  course  of  negotiations  relating  to  a  particular 
business ;  but  he  cannot  understand  on  what  theory 
Bradstreet  &  Company  can  be  regarded  either  as  the 
general  agents  of  the  plaintiff,  or  as  their  special  agents 

57 


54  MERCANTILE    AGENCIES. 

with  roforcncc  to  the  business  transactions  between  the 
plaintiffs  and  their  customers,  so  that  information  com- 
municated to  them  can  be  held,  in  law,  to  have  been 
communicated  to  the  plaintiffs  themselves." 

"True,"  he  says,  "  Bradstreet  &  Company  were  in  a 
certain  sense  the  agents  of  the  plaintiffs,"  but  he  thinks 
that  the  extent  of  their  agency  was,  that  they  agreed  to 
furnish,  upon  iiiquiri/^  such  information  as  they  had  in 
regard  to  the  financial  condition  of  persons  in  relation 
to  whom  their  subscribers  might  desire  to  inquire." 

This  question  will  undoubtedly  receive  further  con- 
sideration. 

The  latest  reported  case  in  which  this  question  has 
appeared,  so  far  as  we  know,  is  the  case  of  the  Genesee 
County  Savings  Bank  vs.  The  Michigan  Barge  Company, 
T.  W.  Ferry  and  E.  P.  Ferry ,^  decided  by  the  Supreme 
Court  of  Michigan  during  the  October  Terra,  1883. 
This  was  an  attachment  suit  in  which  it  was  claimed 
that  tlie  debt  respecting  wliich  the  suit  was  brought  was 
fraudulently  contracted.  T.  W.  Ferry  was  the  president 
and  Andrew  Thompson  was  the  treasurer  of  the  Barge 
Company.  At  some  time,  through  one  or  both  of  these 
officers,  the  company  procured  a  rating  at  Bradstrec^t's 
Commercial  Agency  as  owning  property  worth  $20(),0()(), 
while  the  plaintiff's  testimony  strongly  tended  to  show 
that  the  property  was  not  worth  more  than  $100,000, 
several  of  the  witnesses  putting  it  below  $70,000.  Dur- 
injr  the  trial  of  the  case  in  the  Circuit  Court  an  attempt 
was  made  to  introduce  in  evidence  the  report  made 
by  T.  W.  Ferry  to  Bradstreet's  agency,  and  upon  which 
the  plaintiff  claimed  to  have  relied  and  acted.  Objection 
was  made  and  sustained.    Speaking  of  the  statement  made 

»  52  Mich.  164. 
58 


MERCANTILE    AGENCIES.  55 

to  the  mercantile  agency,  the  Court,  Sherwood,  J.,  held 
that  the  circuit  judge  erred  in  rejecting  the  report. 
Quoting  api)rovingly  from  the  opinion  of  the  Court  in 
Eaton  vs.  Avery,  the  Court  said : — 

"  We  think  a  person  furnishing  information  to  a 
commercial  agency  as  to  his  means  and  pecuniary  re- 
sponsihility,  is  to  be  presumed  to  have  done  so  to  enable 
the  agency  to  communicate  the  same  to  persons  interested 
for  their  guidance  in  giving  credit  to  him,  and  so  long  as 
such  intention  exists,  and  the  representations  reach  the 
persons  for  whom  they  were  intended,  it  is  immaterial 
whetlier  they  passed  through  a  direct  channel  or  other- 
wise, provided  they  were  reported  by  the  agency  as  made 
by  the  party. 

"  It  is  claimed  the  representations  given  by  Ferry 
were  in  writing,  and  the  plaintiff  did  not  offer  the 
original.  The  original  was  copied  by  the  witness,  and 
then  it  was  handed  back  to  Ferry.  Plaintiff  gave  de- 
fendants' attorney  notice  to  produce  the  original,  which 
was  not  done,  and  Ferry  was  in  Europe.  Under  the  cir- 
cumstances we  think  the  testimony  offered  was  proper, 
and  should  have  been  received." 

LIABILITY  OF  MERCANTILE  AGENCIES  FOR  FRAUD, 
BREACH  OF  CONTRACT,  AND  NEGLIGENCE. 

It  seems  hardly  necessary  to  consider  the  question  of 
the  liability  of  mercantile  agencies  in  cases  of  fraud 
practised  by  them.  It  is  well  settled  in  English  and 
American  jurisprudence  that  fraud  or  deceit,  accom- 
panied with  damage,  is  a  good  cause  of  action.  When 
a  party  asserts  a  falsehood  with  a.  fraudulent  design  and 
damage  results,  he  will  be  held  responsible.     Mercantile 

agencies  are  no  exception  to  this  rule. 

59 


56  MERCANTILE    AGENCIES. 

Their  liability  under  tlu'ir  contracts  doponds  upon  the 
wordinir  of  the  same.  Thev  are  liable  to  subscribers  if 
they  refuse  to  furnish  information  upon  request.  Then 
there  is  generally  a  clause  to  the  effect  that  they  will 
furnish  information  to  the  best  of  their  ability.  In  case 
an  action  should  be  brought  against  them  for  a  breach 
of  this  clause  there  would  always  be  an  interesting  ques- 
tion for  the  jury. 

We  come  next  to  the  subject  of  negligence.  Negli- 
gence is  the  absence  of  that  deforce  of  care  which  the  law 
requires  under  certain  circumstances.  The  law  recog- 
nizes the  fact  that  "  circumstances  alter  cases,"  and 
therefore  proportions  the  degree  of  care  to  be  exercised 
according  to  the  circumstances  of  a  particular  case. 
The  general  rule  is,  that  when  one  is  employed  to  do 
certain  services  for  another,  and  there  is  no  special  con- 
tract on  the  subject,  he  assumes  to  exercise  in  the 
employment  ordinary  care  and  skill.  If  it  can  be  shown 
that  he  has  been  negligent  in  the  exercise  of  his  employ- 
ment, the  law  holds  him  responsible.  This  rule  applies 
to  mercantile  agencies,  and  for  any  negligence  on  their 
part  an  action  on  the  case  can  be  brought. 

An  examination  of  the  contracts  entered  into  between 
mercantile  agencies  and  their  subscribers  will  show  that 
the  acrencies  are  well  aware  of  the  delicate  nature  of 
their  duties  and  the  liability  to  commit  errors  to  which 
they  are  exposed.  They  endeavor  to  relieve  themselves 
of  responsibility  so  far  as  the  law  permits.  One  thing 
they  cannot  do.  The  law  will  not  permit  a  person  to 
protect  himself  by  contract  against  his  own  negligence. 
Tiiis  question  arose  in  tlie  case  of  Roesner,  Adm'r,  vs. 
Herrmann.^     The  case  was  tried  in  the  United  States 

»  8  Fed.  Rep.  782. 
60 


MERCANTILE   AGENCIES.  57 

District  Court  for  Indiana  in  1881.  An  agreement  had 
been  entered  into  between  Herrmann  and  one  Heed,  an 
employe,  by  which,  in  consideration  of  the  employment, 
Herrmann  was  released  from  all  liability  for  damage  in 
case  of  death  or  accident  to  Heed  through  his  (Herr- 
mann's) own  negligence  or  that  of  co-employes.  Gres- 
ham,  D.  J.,  held  that  such  a  contract  was  void  as  against 
public  policy.  "  If  there  was  no  negligence,  the  defen- 
dant needs  no  contract  to  exempt  him  from  liability. 
If  he  was  negligent,  the  contract  set  out  in  his  answer 
will  be  of  no  avail." 

Tarling  vs.  Cooper,  reported  in  the  Law  Times,  is 
an  instructive  case.  It  was  argued  before  the  High 
Court  of  Justice,  Queen's  Bench  Division.  From  the 
statement  of  the  case  in  the  Law  Times,  we  conclude 
that  a  verdict  for  the  plaintiff  had  been  returned  in  the 
lower  court  and  that  there  had  been  an  appeal.  The 
plaintiff  was  a  wholesale  clothier  and  ware-houseman, 
and  the  defendants  carried  on  a  business  known  as  the 
"  United  Mercantile  Agency."  The  defendants  under- 
took to  make  all  proper  and  necessary  inquiries  as  to  the 
mercantile  status,  respectability,  and  solvency  of  any  per- 
son concerning  whom  the  plaintiff  might  wish  to  have 
information,  to  report  the  result  to  the  plaintiff,  and  in 
making  such  report  to  exercise  due  reasonable  care  and 
skill.  The  plaintiff  was  furnished  with  a  status  cheque- 
book, with  directions  on  tlie  cover  to  fill  in  the  cheques 
with  careful  and  accurate  particulars  of  any  person  about 
whom  he  wished  inquiries  to  be  made.  In  October, 
1878,  the  plaintiff  requested  information  about  a  firm 
whose  name  he  wrote  as  M.  Lowe  «&  Son,  tailors  in 
Swansea.  The  defendants  searched  their  register,  found 
nothing  against  M.  Lowe  &  Son,  but  communicated  with 

5  61 


58  MERCANTILE    AGENCIES. 

a  correspondent  at  Swansea,  who  reported  to  them,  and 
they  sent  the  following  report  to  tlie  plaintiff: 

"  Status  report  respecting  M,  Lowe  &  Son. 

"  Correspondent  r(>ports  that  it  should  be  B.  Lowe  & 
Son ;  having  been  established  several  years,  B.  Lowe  has 
only  lately  taken  his  son  into  partnership.  Do  not  seem 
to  be  doing  much  business,  and  they  seem  to  have 
ample  stock.     Considered  safe  for  about  oClOO. 

"  Signed  Cooper  &  Craig, 

"  per  II.  M." 

"  This  information  is  obtained  from  the  best  sources 
available,  and  is  given  in  confidence,  but  no  responsi- 
bility is  undertaken  on  account  hereof." 

The  information  was  correct  as  to  B.  Lowe  &  Son,  the 
firm  about  whom  the  plaintiff  meant  the  inquiry  to  be. 
He  gave  the  firm  credit,  and  they  paid  him  bills  for  more 
than  £100.  Eventually,  when  in  plaintiff's  debt  to  the 
amount  of  £180,  the  firm  failed,  and  it  appeared  that 
there  was  a  bill  of  sale  over  all  B.  Lowe's  property. 
This  bill  of  sale  was  duly  registered  and  was  recorded  in 
the  defendants'  books  at  the  date  of  the  inquiry.  The 
plaintiff  lost  the  value  of  the  goods  which  he  had  sup- 
plied. The  Court  said  that  the  defendants  claimed  to 
be  protected  from  liability,  even  if  they  were  negligent, 
by  reason  of  the  directions  on  the  cheque-book  and  by 
using  the  words  "  no  responsibility."  They  claimed 
that,  if  the  negligence  did  make  them  liable,  the  plain- 
tiff's contributory  negligence  absolved  them.  AVith  re- 
gard to  the  point  of  no  responsibility  the  Court  held  that 
it  had  recently  been  decided  that  this  did  not  entitle  the 
defendants  to  exemption  or  make  it  the  less  a  contract 
by  them  to  exercise  the  greatest  care,  and  as  to  the 
question  of  contributory  negligence  it  did  not  appear 
that  the  mistake  of  the  plaintiff  in  writing  M.  Lowe  & 
62 


MERCANTILE    AGENCIES.  69 

Son  instead  of  B.  Lowe  &  Son  had  misled  the  defen- 
dants. There  was  evidence  that  the  defendants  had 
been  guilty  of  negligence  in  not  exanuning  their  books 
after  the  mistake  as  to  the  initial  was  corrected  by  their 
correspondent.     The  Court  sustained  the  verdict. 

The  law  holds  the  principal  responsible  for  the  acts  of 
his  agent  done  within  the  scope  of  his  authority.  This 
rule  would  also  apply  to  mercantile  agencies,  did  they  not 
by  their  contracts  relieve  themselves  from  all  responsi- 
bility for  loss  or  injury  caused  by  the  neglect  or  other 
act  of  any  officer,  agent,  or  employe  in  procuring,  collect- 
ing, and  communicating  information.  The  law  permits 
persons  to  protect  themselves  by  contract  against  the  neg- 
ligence of  their  agents.  Common  carriers,  inn-keepers, 
and  other  persons  engaged  in  the  exercise  of  a  public 
calling  cannot  do  this.  The  exception  in  their  case  is 
owing  to  the  fact  that  it  is  held  that  it  Avoidd  be  against 
the  public  interests  to  permit  it.  But  mercantile  agen- 
cies contract  in  this  way,  and  the  law  protects  them.  So 
it  was  held  in  the  case  of  Duncan,  Hale  &  Co.  against 
Dun,  Barlow  &  Co,^  tried  in  1879,  in  the  United  States 
Circuit  Court  for  the  Eastern  District  of  Pennsylvania, 
before  Judges  McKennan  and  Butler. 

Duncan,  Hale  &  Co.  had  applied  to  the  defendants  at 
their  offices  in  Willi amsport  and  Philadelphia  for  infor- 
mation as  to  the  standing,  responsibility,  means,  and  so 
forth,  of  one  James  Hill.  The  report  communicated  by 
the  defendants,  by  their  agents  in  AVilliamsport  and 
Philadelphia,  read  as  follows  :  "  James  Hill,  commission 
merchant,  Pittston,  Pa.,  July  20th,  1876.  Character, 
etc.,  good ;  capital  in  business  $4000  ;  owns  real  estate 
worth  $10,000  and  clear.    Credit  good."    Relying  upon 

^  7  "Weekly  Notes,  24G  ;  9  Centnil  L.  J.  151. 

63 


60  MERCANTILE   AGENCIES. 

this  information,  Duncan,  Hale  «&  Co.  sold  and  delivered 
to  Hill  goods  to  the  value  of  1^5110.30.  It  appeared 
that,  on  the  day  on  which  the  defendants  communicated 
the  information  to  the  plaintiffs,  Hill  was  not  the  owner 
of  real  estate  cl«ar  of  incumbrances,  and  worth  $10,000, 
but,  on  the  contrary,  was  the  owner  of  real  estate  all  of 
whicli  had  mortgages  thereon  which  were  duly  recorded 
in  the  county  wlicrein  the  said  real  estate  was  situated, 
and  that  the  said  Hill  was  at  the  date  of  the  sale  and 
delivery  of  the  goods  insolvent.  It  also  appeared  that 
Hill  was  still  owing  $3000  to  the  plaintiffs.  The  writ- 
ten contract  between  Duncan,  Hale  &  Co.  and  Dun, 
Barlow  &  Co.  contained,  inter  alia,  the  following 
clauses : — 

"  The  said  proprietors  are  to  communicate  to  us,  on 
request  for  our  use  in  our  business,  as  an  aid  to  us  in 
determining  the  propriety  of  giving  credit,  such  informa- 
tion as  they  may  possess  concerning  the  mercantile 
standing  and  credit  of  mercliants,  traders,  manufac- 
turers, etc.,  throughout  the  United  States  and  Canada. 
It  is  agreed  that  such  information  has  mainly  been,  and 
shall  mainly  be  obtained  and  communicated  by  servants, 
clerks,  attorneys,  and  employes,  appointed  as  our  sub- 
agents,  in  our  behalf,  by  the  said  11.  G.  Dun  Sc  Co.  The 
said  information  to  be  communicated  by  the  said  R.  G. 
Dun  &  Co.  in  accordance  with  the  following  rules  and 
stipulations,  Avith  which  we,  subscribers  to  the  agency  as 
afon^said,  agree  to  comply  faithfully,  to  wit:  .  .  .  The 
said  R.  G.  Dun  &  Co.  shall  not  be  responsible  for  any  loss 
caused  by  tlie  neglect  of  any  of  the  servants,  attorneys, 
clerks,  and  employes  in  procuring,  collecting,  and  com- 
municating the  said  information,  and  the  actual  verity 
or  correctness  of  the  said  information  is  in  no  manner 
guaranteed  by  the  said  R.  G.  Dun  &;  Co." 
G-l 


MERCANTILE   AGENCIES.  61 

The  defendants  claimed  that  by  the  terms  of  the  con- 
tract they  were  not  responsible  for  the  loss,  since  it  was 
caused  by  the  neglect  of  their  agents.  They  asked  for 
a  nonsuit  and  obtained  it.  A  motion  was  made  to  take 
it  off.  Upon  the  hearing  the  question  of  liability  for 
gross  negligence  under  tlie  contract  was  ably  argued  on 
both  sides.  The  Court,  Butler,  J.,  declared  that  the 
impression  entertained  at  the  trial  had  now  deepened 
into  conviction ;  that  the  lan<j:ua<^e  of  the  contract  was 
broad  enough  to  exempt  the  defendants  from  liability 
for  all  negligence  of  such  agents,  and  was  not  confined 
merely  to  ordinary  negligence.  The  Court  also  held 
that  it  was  undisputed  and  clear  that  the  negligence 
complained  of,  whether  gross  or  otherwise,  was  the  neg- 
ligence of  the  agents  and  not  of  the  defendants.  The 
motion  was  refused. 

The  subscriber  comes  in  contact  with  the  agency 
when  information  is  called  for,  and  in  response  repre- 
sentations are  made  in  regard  to  some  person  or  persons. 
When,  therefore,  a  subscriber  complains  of  fraud,  breach 
of  contract,  or  negligence  on  the  part  of  the  agency,  it 
itiust  be  in  relation  to  such  representations.  AVe  have 
laid  down  the  rule  that  mercantile  agencies  are  liable  for 
any  damage  resulting  from  fraudulent  representations, 
breach  of  contract,  or  negligence  on  their  part.  Let  us 
now  see  whether  this  statement  can  pass  without  quidi- 
fication.  So  far  as  fraud  was  concerned,  there  can  be  no 
question.  When  the  law  declares  that  fraud  or  deceit, 
accompanied  with  damage,  is  a  good  cause  of  action,  it 
is  simply  applying  a  principle  of  natural  justice.  No 
statute  adopted  to  protect  people  against  fraud  and  per- 
jury can  be  relied  upon  as  a  defence  by  him  who  has 
been  guilty  of  fraud.  But  when  we  come  to  the  (pies- 
tion  of  breach  of  contract,  or  negligence,  we  may  have  to 

60 


62  MERCANTILE    AGENCIES. 

qualify  our  statement  so  far  as  some  of  our  States  are 
concerned.     We  refer  to  those  States  in  which  statutes 
simiUir  to  that   known   as  Lord   Tenterden's  Act  have 
been  adopted.     It  will  be  remembered  that  the  fourth 
section  of  the  Statute  of  Frauds  provided,  inter  alia, 
*'  that  no  action  sliall  be  brought  whereby  to  charge  the 
defendant,  upon  any  special  promise,  to  answer  for  the 
debt,  default,  or  miscarriage  of  another  person  unless  the 
agreement  upon  which  such  action  shall  be  brought,  or 
some  memorandum  or  note  thereof,  shall  be  in  writing 
and  signed    by  the  party  to  be   charged    therewith,  or 
some   other  person  thereunto  by  him  lawfully  author- 
ized."    This  clause  was  incorporated  to  do  away  with 
verbal  guaranties.     In  the  well-known  case  of  Pasley  vs. 
Freeman,  in  which  Freeman  was  held  liable  for  false 
representations  as  to  the  credit  of  one  Falch,  the  Court 
held  that  the  statute  applied  only  to  cases  of  contract, 
and  established  the  doctrine  that  an  action  for  deceit 
could  be  brought  though  the  repr(\sentations  were  only 
verbal.     Pasley  vs.  Freeman  was  clearly  within  the  mis- 
chiefs intended  to  be  remedied  by  the  Statute  of  Frauds. 
It  was  within  the  spirit,  if  not  within  the  letter  of  the 
law.     Lord  Eldon  condemned  strongly  the  doctrine  es- 
tablished in  that  case.     He  held  that  the  statute  would 
have  to  be  applied  to  such  cases,  or  a  new  statute  would 
have  to  be  passed.    Twenty-seven  years  later.  Parliament 
enacted,  in  the  9  Geo.  IV.  c.  14,  s.  6,  known  as  Lord 
Tenterden's   Act,  "That    no    action    shall    be    brought 
whereby  to  charge  any  person  upon,  or  by  reason  of  any 
representation  or  assurance  made  or  given  concerning  or 
relating  to  the  character,  conduct,  credit,  ability,  trade 
or  dealings  of  any  other  person,  to  the  intent  or  purpose 
that  such  otlu^r  person  may  obtain  credit,  money  or  goods 
upon  [mistake  for  thereupon],  unless  such  representation 
GG 


MERCANTILE    AGENCIES.  63 

or  assurance  be  made  in  writing,  signed  by  the  party  to 
be  charged  therewith." 

Heed,  in  his  treatise  on  the  Law  of  the  Statute  of 
Frauds,  declares  that  "  the  object  of  this  enactment 
seems  to  have  been  to  put  misrepresentations  in  mercan- 
tile cases  upon  the  same  footing  with  guaranties.  It 
has  been  so  construed  as  to  embrace  every  incorrect  rep- 
resentation untinged  by  fraudulent  intent.,  and  no  others." 
Statutes  similar  to  Lord  Tenterden's  Act  have  been 
adopted  in  Alabama,  California,  Indiana,  Kentucky, 
Maine,  Massachusetts,  Michigan,  Missouri,  Oregon, 
South  Carolina,  Vermont,  Virginia,  and  Wyoming  Ter- 
ritory. 

Now,  it  is  not  difficult  to  see  that  this  statute  may 
afiect  the  question  which  we  have  raised  when  we  re- 
member that  the  business  of  mercantile  agencies  con- 
sists wholly  in  making  representations  as  to  the  charac- 
ter, conduct,  credit,  ability,  and  so  forth,  of  persons.  Let 
us  suppose,  for  example,  that  an  action  is  brought  for  the 
breach  of  a  contract  containing  a  clause  to  the  effect 
that  the  agency  will  furnish  information  to  the  best  of 
its  ability,  ^.  e.,  make  representations  as  to  the  credit, 
character,  standing,  etc.,  of  persons  to  the  best  of  its 
ability.  Or  let  us  suppose  that  an  action  on  the  case 
is  brought  on  account  of  negligence.  On  the  trial  it 
appears  that  the  representations  are  not  in  writing. 
AVill  the  action  faiU  Is  the  statute  applicable  to  this 
case "?  Let  us  examine  the  cases  in  which  this  question 
has  appeared. 

The  first  case  in  which  this  question  was  presented  to 
the  courts  was  the  case  of  McLean  vs.  Dun,  Winum  & 
Co.^     It  was  tried  before  Moss,  J.,  and  a  jury  at   the 


1  Upper  Canada,  39  Q.  B.  551. 

67 


64  MERCANTILE   AGENCIES. 

Toronto  Fall  Assizes.     Upper  Canada  lias  adopted  Lord 
Tenterden's  Act. 

]\[cLean  was  in  June,  1875,  a  wholesale  leather-dealer 
in  the  city  of  Toronto.  By  the  terms  of  a  contract  be- 
tween him  and  Dun,  AViman  &  Co.,  who  were  the  pro- 
prietors of  a  mercantile  agency,  they  agreed  to  furnish 
to  the  best  of  their  ability  information  of  the  mercantile 
standing  and  credit  of  business  men  concerning  wliom 
the  subscriber  should  make  inquiries.  McLean  desired 
information  in  regard  to  one  Ernest  M.  Wilson,  who 
had  applied  to  him  to  purchase  about  |500  worth  of 
leather  on  credit.  On  the  lOth  of  June  he  sent  his 
clerk  to  the  office  of  the  agency,  and  the  clerk,  witliout 
giving  any  information  as  to  the  contemplated  sale  or  its 
amount,  made  application  upon  a  printed  form  furnished 
to  him  for  the  purpose  by  the  defendants.  According 
to  the  clerk's  testimony,  the  defendants'  clerk  read  to 
him  out  of  a  book  that  Ernest  M.  Wilson  was  the  son 
of  David  Wilson ;  was  formerly  in  partnership  with  one 
Phillips  ;  that  he  had  $10,000  of  stock  ;  that  he  had 
$5000  or  $6000  in  the  business ;  that  he  claimed  to  be 
worth  $7000  ;  that  he  mostly  dealt  in  United  States 
eoods  ;  that  his  character  and  habits  were  good  ;  that  he 
was  doing  a  fair  trade ;  and  that  his  credit  was  good  locally. 
This  information  had  been  collected  by  the  agency  April 
29th,  1875.  The  defendants'  clerk  admitted  that  he 
had  given  the  plaintiff's  clerk  substantially  the  informa- 
tion which  he  had  testified  to,  but  denied  that  he  gave 
any  information  to  the  effect  that  Wilson's  credit  was 
good  locally.  On  the  strength  of  this  information  Wil- 
son in  June  obtained  goods  to  the  value  of  $524.17  on  a 
credit  of  four  months.  Wilson  was  really  insolvent  at 
the  time  the  report  was  made.  In  July  he  absconded 
from  Canada.  McLean  sued  Dun,  Wimau  &  Co.,  charg- 
es 


MERCANTILE    AGENCIES.  65 

ing  that  they  had  not  exercised  ordinary  care  and  ability 
in  ascertaining  the  mercantile  standing,  etc.  of  Wilson 
before  making  the  report,  but  that  they  had  wholly  neg- 
lected so  to  do. 

It  was  proved  that  on  the  steamboat  City  of  Toronto 
Wilson  had  told  a  person  that  he  was  going  to  New 
York  to  buy  goods  and  had  ^7000  with  him.  The  evi- 
dence further  showed  that  up  to  the  time  he  absconded 
he  had  a  good  bank  account ;  that  he  always  had  a  good 
balance  in  his  favor,  and  that  he  never  required  any  dis- 
counts. There  was  testimony  as  to  his  habits  of  living, 
transactions  as  a  business  man,  and  so  forth,  w^iich  was 
not  favorable  to  him.  There  was  conflicting  testimony 
as  to  whether  he  stood  in  good  credit  or  not.  It  was 
shown  from  what  source  the  defendants  had  obtained 
their  information,  and  it  was  admitted  that  they  had 
acted  honestly  and  in  good  faith. 

The  plaintiff's  counsel  in  opening  the  case  admitted 
that  the  representations  as  to  W^ilson  made  by  the 
agency  were  not  in  writing,  and  the  defendants'  .counsel, 
claiming  that  a  writing  was  necessary,  moved  for  a  non- 
suit. The  judge,  although  in  doubt,  allowed  the  case  to 
go  to  the  jury,  reserving  leave  to  the  defendants,  if  neces- 
sary, to  move  to  enter  a  nonsuit.  The  judge  left  to  the 
jury  certain  questions,  and  on  their  finding  entered  a 
verdict  for  the  plaintiff.  A  rule  was  obtained  from  the 
Court  of  Queen's  Bench  for  Upper  Canada  calling  on 
the  plaintifl'  to  show  cause  why  the  verdict  should  not 
be  set  aside,  etc.  The  case  was  argued  before  the  Court 
in  x\ugust  1876.  Several  interesting  questions  were 
discussed,  but  we  shall  confine  our  attention  to  the 
opinion  of  the  Court  as  to  the  statute  and  its  relation  to 
the  case.  The  defendants  claimed  that,  unless  the  re- 
presentation or  report  be  proved  by  writing,  signed  by 

69 


66  MERCANTILE   ANENCIES. 

the  (lofcndants,  there  was  in  law  no  such  representation 
or  ri-port  as  alleged ;  in  other  words,  that  it  came  witli- 
in  the  words  of   the  statute. 

The  Court,  Harrison,  C.  J.,  admitted  that  the  repre- 
sentation fell  within  the  very  words  of  the  statute. 
"  But,"  said  the  Court,  "  it  is  not  enough  for  defendants 
in  order  to  defeat  the  plaintiff's  action  to  show  that  the 
representation  is  under  the  statute.  The  defendants 
must  satisfy  the  Court  in  the  language  of  the  statute, 
either  that  the  action  is  iipon  the  representation,  or  hy 
reason  of  the  representation.  The  action  here  is  no 
sense  upon  the  representation.  The  action  is  for  a 
breach  of  contract.  .  .  .  Where  the  foundation  of  the 
action  is  contract,  although  the  declaration  contain  alle- 
gations of  fraud  or  fraudulent  representations,  these  need 
not  be  proved  and  may  be  struck  out  of  the  declaration 
as  surplusage.  If  the  contract  were  not  proved  in  this 
case,  and  the  plaintiff  for  remedy  were  driven  to  resort 
to  the  false  representation,  he  would,  we  think,  fail  for 
want  of  the  writing  signed  by  the  defendants,  but  the 
substance  of  his  declaration  is  the  contract,  the  duty 
arising  from  contract,  and  the  breach  of  that  duty. 
While  Lord  Tenterden's  Act  requires  such  a  representa- 
tion to  be  in  writing  signed  by  the  defendant,  there  is 
no  statute  which  requires  such  a  contract  to  be  in  writ- 
ing." 

Morrison,  J.,  concurred.  Wilson,  J.,  was  not  present 
at  the  argument,  and  took  no  part  in  the  judgment.  The 
rule  nm  was  discharged. 

The  case  was  appealed  to  the  Court  of  Appeals  for 
Upper  Canada,  and  was  argued  before  the  Court  in 
March,  1877,  four  judges  being  pr(>sent.  The  principal 
question  presented  by  the  appeal  related  to  the  defence 
rested  on  the  statute.  Hagarty,  C.  J.  C.  P.,  agreed  with 
70 


MERCANTILE    AGENCIES.  67 

the  court  below.     Burton,  J.  A.,  held  that  the  statute 
was  a  good  defence.     Commenting  upon  Justice  Harri- 
son's opinion,  he  says :    "  Granting  that   the  action   is 
founded  on  the  defendants'  want  of  care  in  performing 
their  contract,  the  plaintiff  fails  to  show  any  right  to  re- 
cover the  damages  awarded,  unless  he  proves  the  repre- 
sentation, and  that  he  acted  upon  it.     To  do  this  he  is 
driven  to  prove  the  representations  given  verbally  to  his 
clerk,  and  if  the  statute  forbids  this,  his  action  to  that 
extent  fails.     As  before  remarked,  if  the  plaintiff  did 
not  furnish  the  goods  in  reliance  upon   such  representa- 
tion there  is  an  end  of  the  inquiry.     He  has  sustained 
the  loss  through  the  confidence  which  he  has  mistakingly 
placed  in  the  customer,  and  not  by  reason  of  his  having 
relied  on  the  representations  of  the  defendant ;  but  if  he 
did  part  with  his  property  in  reliance  upon  the  represen- 
tations .  .  .  can  it  be  plausibly  urged  that  it  docs  not 
come  within  the  very  terms  of  the  statute,  and  is  there- 
fore not  receivable  in  evidence  unless  in  writing,  and 
signed  by  the  defendant'?"     Patterson,  J.  A.,  said:   "I 
see  no  difficulty  in  holding  that  the  application  of  the 
statute  is  not  excluded  by  the  mere  circumstance  that 
the  representation  is  made  in  pursuance  of  a  contract 
which  requires  a   true  representation."     Blake,  V.  C, 
said:  "The  injury  in  the  present  case  arises  from  the 
defendants  having  given  certain  unreliable  information 
to  the  plaintiff  as  to  the  credit  of  another,  on  which  he 
acted,  and  whereby  he  has  lost  the  amount  for  which 
credit  was  given.     There  was  by  the  defendants  a  repre- 
sentation .   .   .  made  .   .   .  concerning  .   .   .  the  credit  of 
a  person  to  the  intent  or  purpose  that  such  other  person 
miglit  obtain  goods  or  credit  thereupon."     He  held  that 
the  statute  clearly  applied  to  the  case,  and  that  the  only 
way  in  which  its  effect  could  be  done  away  with  would 

71 


68  MERCANTILE    AGENCIES. 

be  by  adding  a  clause  that  it  sliall  not  apply  to  dealings 
Avitli  mercantile  agencies.  Tlio  apjxnd  was  allowed  with 
costs,  and  the  defendant  in  the  appeal  was  given  liberty 
to  take  a  verdict  for  nominal  damages,  or  a  nonsuit. 

The  next  case  in  which  this  question  arose  was  the 
case  of  Sprague  vs.  H.  G.  Dun  &  Co.^  It  was  tried  in 
the  Philadelpliia  Court  of  Common  Pleas  in  1878.  The 
plaintiff,  who  was  a  druggist  and  a  customer  of  the 
agency,  inquired  at  its  office  in  Mobile  with  regard  to 
the  credit  and  character  of  one  Getz.  He  was  informed 
that  both  were  good,  and  was  also  shown  a  book  in  which 
Getz  was  described  as  possessing  a  considerable  amount 
of  real  and  personal  property,  and  as  one  who  might  be 
trusted  to  any  reasonable  amount.  The  plaintiff  had 
been  for  some  time  associated  in  business  transactions 
with  Getz,  and  was  in  tlie  habit  of  raising  money  with 
his  aid,  and  extending  a  like  help  to  him.  The  plaintiff 
claimed  that  in  consequence  of  the  information  received 
he  was  led  to  put  his  name  to  various  accommodation 
notes  which  were  also  signed  or  indorsed  by  Getz,  and 
discounted  at  the  bank,  and  the  proceeds  divided  be- 
tween Getz  and  the  plaintiff.  Getz  failed  not  long 
afterwards  without  having  contributed  his  share  to  the 
payment  of  these  instruments,  wliich  the  plaintiff  was 
compelled  to  take  up,  and  the  action  was  brought  to  re- 
cover damages  for  loss  caused  by  the  defendants'  negli- 
gence. The  plaintiff,  when  he  made  his  contract  with 
the  agency,  signed  a  stipulation  that  the  information  de- 
rived by  him  therefrom  would  be  used  exclusively  for 
the  "  legitimate  business  of  his  establishment,"  and  it 
was  claimed  as  a  defence  that  the  floating  of  comm^ercial 
paper  was  not  a  part  of  the  legitimate  business  of  plain- 
tiff, and  that  the  defendants  w(;re  not  liable  for  any  loss 

»  12  Phila.  31U. 
72 


MERCANTILE    AGENCIES.  69 

that  might  happen  therefrom.  A  further  defence  was 
that  the  representation  as  to  Getz's  responsibility  not 
being  in  writing,  signed  by  defendants,  was  void  under 
a  statute  of  the  State  of  Ahibama,  which  is  substantially 
the  same  as  Lord  Tenterden's  Act.  The  plaintiff's 
counsel  maintained  that  the  statute  did  not  apply  to  a 
case  like  the  present,  which,  though  worded  in  tort,  had 
its  origin  in  contract,  and  where  a  recovery  may  conse- 
quently be  had  for  negligence  in  the  absence  of  actual 
or  constructive  fraud. 

The  Court,  Hare,  P.  J.,  held  that  the  first  ground  of 
defence  was  tenable.  x\s  to  the  second  ground  of 
defence  the  Court  said :  "  The  question  is  not  free  from 
difficulty,  but  we  incline  to  consider  the  plaintiff's  inter- 
pretation as  correct.  It  is  an  established  rule  that 
remedial  statutes  shall  be  read  with  a  due  regard  for  the 
object  which  the  Legislature  had  in  view,  and  this  in 
the  case  of  the  act  in  question  was  not  to  relax  the 
bonds  of  contract,  but  to  guard  against  loose  and  un- 
founded charges  of  fraud — modus  et  conventio  vincunt 
legem — and  the  agreement  into  which  the  defendants 
entered  was  a  waiver  of  the  right  to  take  advantage  of 
the  statute. 

"  One  who  is  under  an  express  or  implied  obligation 
to  keep  his  principal  or  employer  well  informed,  is 
answerable  not  only  for  false  statements,  but  also  for  not 
usinsf  due  dilisrence  to  ascertain  the  truth  and  communi- 
cate  it  when  occasion  requires,  and  as  the  statute  will 
not  preclude  a  recovery  on  the  former  ground,  so  it 
should  not  be  a  defence  to  a  suit  brought  on  the  latter. 
The  criterion  seems  to  be,  is  the  alleged  tort  also  a 
breach  of  contract  for  which  a  recovery  could  be  had 
without  proof  of  a  scienter,  although,  where  the  circum- 
stances are  such  that  the  defendant  would  be  answerable 

73 


70  MERCANTILE    AGENCIES. 

ex  contractu^  the  case  will  not  be  witliin  the  statute, 
because  the  fault  is  so  gross  as  to  be  e([uivalent  to  a 
fraud,  or  such  as  would  have  sprung  from  a  fraudulent 
intent.  ...  If  the  defendants  mean  to  rely  upon  the 
statute,  they  should  either  make  written  communications 
to  tlunr  subscribers  or  else  inform  them  that  they  are  not 
legally  responsible  for  the  truth  of  what  they  say." 

Vv'ith  all  due  respect  to  the  opinions  of  Harrison,  C. 
J.,  llagarty,  C.  J.  C.  P.,  and  Hare,  P.  J.,  we  think  that 
the  law  is  with  the  decision  of  the  Court  of  Appeals  for 
Upper  Canada.     It    is  not  surprising  that  tlie   judges 
have  found  some  difficulty  in  settling  the  law  applicable 
to  these  cases.     The  circumstances  were  new  and  start- 
ling.    Here  was  a  statute  whose  provisions  were  clear 
and  distinct,  but  could  this  apply  to  a  case  in  which  one 
party  had  contracted  to  do  certain  services  for  another, 
and  those  services  were  of  the  very  nature  of  those  rep- 
resentations which  the  statute  required  to  be  in  writing] 
Surely  there  was  reason  for  concluding  that  the  statute 
was  either  waived  or  did  not  apply  to  such  cases.     But 
Lord  Tenterden's  Act  is  an  act  which  relates  to  the  sub- 
ject   of  evidence.      To  prove  a  breach  of  contract  or 
negligence  it  is  necessary  to  introduce  in  evidence  the 
representations.     Tliis  cannot  be  done  unless  the  repre- 
sentations are  in  writing.     The  action  would  therefore 
fail.      We  shall    therefore    qualify  our    statement    that 
mercantile  agencies  are  liable  for  br(nich  of  contract  and 
negligence,  by  saying  that  in  those  States  in  which  Lord 
Tenterden's  Act  has  been  adopted,  they  could  only  be 
\\v\i\  responsible  if  the  representations  which  they  make 
to  subscribers  are  in  writing.     In  the  States  in  which  that 
act  has  not  been  adopted  this  rule  would  not  hold  good. 
The  tendency,  however,  is  to  adopt  in  other  States  the 
requirements  of  the  act,  and  for  this  reason  this  question 

is  one  of  growing  importance. 
74 


TABLE  OF  CASES. 


Note; 


Mich 


Beardsley  vs.  Tappan,  r>  Blatch.  4n7 
Billings  vs.  Russell,  8  Boston  L.  R.  699    . 
Cockayne  vs.  Hodgkisson,  24  Eng.  Com.  Law,  543  . 
Commonwealth  vs.  Call,  21  Pick.  515 

vs.  Harley,  7  Mete.  4G2 

rs.  Staeey,  8  Phila.  617 

Coxheady.f.  Richards,  10  Jurist,  984 
Daries  vs.  Snead,  L.  R.  5  Q.  B.  611 
Duncan,  Dale  &  Co.  vs.  Dunn,  Barlow  &  Co.,  7  Weekly 

Eaton  ys.  Avery,  83  N.Y.  31 

Erber  &  Stickler  vs.  R.  G.  Dun  &  Co.,  4  McCrary,  160 

Fleming  vs.  Newton,  1  H.  L.  C.  362 

Gassett  vs.  Gilbert,  6  Gray,  97 

Genessee  County  Bank  vs.  Michigan  Barge  Co.  et  al.,  52 

Goldstein  vs.  Foss,  12  Eng.  Com.  Law,  252 

Harman  /•.';.  Delany,  2  Str.  898  .... 

Harrison  vs.  Bush,  85  Eng.  Com.  Law,  173      . 

Lawless  vs.  Anglo-Egyptian  Co.,  L.  R.  4  Q.  B.  262 

Lewis  t7s.  Chapman,  16  N.  Y.  373    .... 

MacuUar  vs.  McKinley,  49  N.  Y.  (Superior  Ct.)  5     . 

McLean  vs.  Dun,  Wiman  &  Co.,  Upper  Canada,  39  Q.  B 

Moore  ys.  Farrall,  4  B.  &  Ad.  871     .... 

Morgans.'?.  Skiddy,  62  N.  Y.  319     .... 

Newbury  vs.  Garland,  31  Barb.  121 

Ormsby  vs.  Douglass,  37  N.  Y.  484 

Pasley  vs.  Freeman,  2  Smith's  Lead.  Cas.  55  ;  3  T.  R.  51 

Roesnervs.  Herrmann,  8  Fed.  Rep.  782  ."        .         .         . 

Scott  vs.  Shepherd,   1  Smith's  Lead.  Cas.  210;   2  Wm.  Bl.  89 

Shipley  vs.  Todhunter,  32  Eng.  Com.  Law,  7  C.  &  P.  680 

Sprague  vs.  R.  G.  Gun  &  Co.,  12  Phila.  310     . 

State  ex  reZ.  Lanning  vs.  Lonsdale,  48  Wisconsin,  348 

Sunderlin  vs.  Bradstreet,  46  N.  Y.  188     . 

Tarling  vs.  Cooper,  Law  Times 

Taylor  vs.  Church,  1  E.  D.  Smith,  279     . 

Thomas  vs.  Winchester,  6  N.  Y.  397 

Toogood  vs.  Spyring,  1  C.  M.  &  R.  180    . 

Trussel  vs.  Scarlett,  18  Fed.  Rep.  214      . 

Washburn  vs.  Cooke,  3  Denio,  110  . 

Wright  vs.  Woodgate,  2  C.  M.  &  R.  573  . 


551 


246 


164 


5,  24, 


16. 


FA8B 

21,  36 
15 
12 
45 
45 
27 
12 
41 
59 

43,  51 
33 
13 
11 
54 
13 
7 
11 

29,  40 

8 
49 
63 
28 
44 
44 
37,  51 
62 
56 
43 
28 
68 
31 
30 
57 

30,  39 
43 
10 

10,  38 
12 
11 


75 


INDEX. 


ADVERTISEMENT,  liability  for  false,  44. 
AGENCY  (See  Mkucantile  Agency),  5,  6. 

general,  53,  54. 

special,  53,  54. 

BILL  OF  PARTICULARS,  when  demandable,  42. 

BONA    FIDES    ESSENTIAL    TO     nUVILEGED    COMMUNICA, 
TIONS,  28,  31. 

CIPHER,  ofTect  of  statements  in,  31. 
CONFIDENTIAL  COMMUNICATIONS,  9. 
CONTRACT,  5,  56,  57,  58,  59. 

with  mercantile  agency,  5. 

liability  of  mercantile  agency  for  breach  of,  56,  70. 

action  ibiinded  on,  witli  allegations  of  fraud,  63,  69. 
CONTRIBUTORY  NEGLIGENCE  (See  Nkgligence),  58. 
COO  LEY,  remarks  of,  on  Privileged  Communications,  9. 
CREDIT-MAN,  status  of,  35. 
CRIME,  charge  of,  as  affecting  financial  credit,  25. 

DECEIT,  action  for,  when  it  lies,  45. 

ESTOPPEL,  47. 

as  to  third  persons,  47. 
requisites  of  an,  48,  52. 

FRAUD,  42,  55. 

liability  of  mercantile  agency  for,  55. 

in  representations  made  to  mercantile  agency,  42,  43,  44,  45. 

allegations  of,  in  action  founded  on  contract,  63. 

GAIN,  reporting  for,  does  not  vitiate  statement,  26. 

INFORMATION,  refusal  of  mercantile  agency  to  furnish  subscribers  with, 

66. 
INTEREST  ESSENTIAL  TO  PPJVILEGED  COMMUNICATIONS, 

28,  33,  37,  40. 

JUDICIAL  NOTICE  OF  MERCANTILE  AGENCIES,  47. 

LIBEL,  7. 

LDIITATION  OF   LIABILITY   FOR  NEGLIGENCE   (See   Negli- 
gence), 56. 
LORD  TENTERDEN'S  ACT,  62. 

wliere  enacted,  63. 
eifeet  of,  66,  67,  68,  69. 

6  77 


74  INDEX. 

MALICE.  ofTocr  o.,  on  PriviU'irt-d  Communications,  8,  9,  10,  11,  33,  43. 
MEKCANTILK  AGENCY,  dcanitiou  ol',  1. 

liistory  of,  1. 

liahility  of,  for  fraud,  55. 

lialillity  of,  for  its  representations,  56. 

lialiility  of,  for  breacli  of  contract,  50",  70 

is  the  airt'nt  of  its  siibserlliers,  5. 

may  employ  siih-aixents  and  clerks,  39. 

may  furnisli  printed  statements,  39. 

statements  of,  privilejred,  6,  31.  33,  34,  35,  36,  37,  39. 
MISTAKE,  effect  of,  on  statement  by  mercantile  agency,  30. 

NEGLIGENCE,  definition  of,  56. 

liability  of  mercantile  agency  for,  56,  70. 

limitation  of  liability  for,  by  special  contract,  56. 

of  ajieiit,  59. 

limitjition  of  liability  for  agents,  59,  61. 
NOTIFICATION  SHEETS,  33. 

ODGERS,  remarks  of,  on  Privileged  Occasions,  8. 

PRINTED  STATEMENTS  BY  MERCANTILE  AGENCIES,  20. 
PRIVILEGED  COMMUNICATIONS,  32,  33,  34,  35,  36,  37,  38,  39,  40, 
41. 

definition  of,  11,  31, 

interest  essential  to,  28,  33,  37,  40. 

bona  fides  essential  to,  28,  31. 
PRIVILEGED  OCCASIONS,  classification  of,  bv  Odgers,  8. 
PROSPECTUS,  liability  of  tradesman  for  false,  44. 

REPRESENTATIONS  MADE  TO  MERCANTILE  AGENCIES,  42, 

43,  44,  45,  46,  47,  48,  49,  5(i,  51,  65. 
when  thev  amount  to  an  estoppel,  48. 
RESPONDEAT  SUPERIOR,  doctriue  of,  as  applied  to  mercantile  agen- 
cies,  59,  61. 

SECRECY,  when  essential  to  privileged  communications,  23. 

SLANDER,  7,  24. 

STATEMENTS  BY  MERCANTILE  AGENCIES,  48,  70. 

how  long  tliey  liold  good,  51. 

etlect  of,  when  printed,  20. 

eifect  of,  when  written,  20. 

effect  of,  when  oral,  70. 
STATUTE  OF  FRAUDS,  62,  63,  64,  65,  66,  67,  68,  69,  70. 

efl'ect  of,  on  contracts  of  mercantile  agencies,  70. 
STRANGERS,  information  volunteereil  to,  40. 
SUBSCRIBERS  OF  MERCANTILE  AGENCY,  rights  of,  56. 

TRADE  PROTECTION  SOCIETIES,  4. 

WHARTON,  Dii.  FRANCIS,  remarks  of,  on  Privileged  Communications, 
10. 


78 


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